HMRC: Tax gap at 5.6%
HMRC has revealed that the tax gap for 2017/2018 was 5.6%, meaning the Revenue collected 94.4% of all tax due. The figures show that the tax gap, which shows the difference between the amount of tax that should be paid to HMRC and what is actually paid, has fallen from 7.2% since 2005/2006. The duty-only excise tax gap has reduced from 8.4% in 2005/06 to 5.1% in 2017/18, while the corporation tax gap has reduced from 12.5% to 8.1% in the same period. HMRC says avoidable mistakes are costing the Exchequer over £9.9bn a year, with £3bn of this attributable to VAT. The Revenue says efforts to tackle tax evasion, tax avoidance, and non-compliance mean it has secured and protected more than £200bn in extra tax that would otherwise have gone unpaid since 2010. Commenting on the report, Financial Secretary to the Treasury Jesse Norman said: “The UK’s low tax gap underlines both how the vast majority of people are paying the correct amount of tax, and how effective HMRC has been in its efforts to clamp down on tax evasion and avoidance.”
Conservative candidates talk tax at hustings
The first Conservative leadership hustings saw Boris Johnson defend his proposals to raise the 40p rate of income tax from £50,000 to £80,000, insisting it would form “part of a package” that would also benefit low-paid workers. He also said Conservatives should not be “at all shy” of reducing the tax burden on middle incomes. Mr Johnson also warned that Labour leader Jeremy Corbyn and Shadow Chancellor John McDonnell would send the economy into a “death spiral” with a “deranged £300bn programme of re-nationalisation,” claiming they would “whack up taxes, corporation tax, financial transactions tax, inheritance tax, income tax, up to 50%.” Meanwhile, rival Jeremy Hunt used the event to confirm a plan to cut corporation tax to 12.5%, saying such a move would “land an economic jumbo jet on” on Europe’s doorstep. Meanwhile, calculations by the Institute for Fiscal Studies suggest Boris Johnson’s pledges to raise thresholds for higher rate income tax and NI would cost the exchequer up to £20bn a year while mainly benefiting richer households. The Conservative leadership hopeful has proposed raising the threshold at which higher-rate income tax is payable to £80,000 a year from £50,000. The analysis says that cutting tax on these earnings to 20% from 40% would cost the public finances around £9bn a year, and benefit the highest-earning 10% of Britons, while increasing the NI threshold to the £12,500 mark at which income tax becomes payable would cost at least £11bn.
The Sunday Telegraph (23/06/2019) Sunday Express (23/06/2019) Daily Mail (25/06/2019) Financial Times (25/06/2019)
CGT take hits £9.2bn
Figures show that the capital gains tax (CGT) take has hit a record level, with the Government taking £9.2bn in 2018/19. This marks an 18% increase on the year before. The Telegraph’s Harry Brennan says much of the increase has been attributed to a “squeeze” on the buy-to-let sector, with experts saying a change coming into force in 2020 that will force landlords to pay their tax bills within 30 days of selling a property could drive the CGT take up even further. With current rules giving landlords until January 31 to settle due taxes, NFU Mutual’s Sean McCann says: “HMRC clearly sees the opportunity to increase the CGT take by targeting landlords and is introducing new rules to collect the revenue earlier.” Mr Brennan notes that the CGT allowance increased this tax year from £11,700 to £12,000. He also highlights that buy-to-let investors face CGT rates of 18% or 28%, depending on their tax status and their gains, while those selling other assets see rates of either 10% or 18%.
Banks need more support and tax cuts
UK Finance chairman Bob Wigley has warned the Government that UK banks need more support to promote a positive vision of the finance industry. The trade body chair called for a new formal body to be set up to better represent the sector, as the Government had failed to adequately support the finance industry in the Brexit negotiations, and called for tax cuts. He noted that the aggregate rate of tax paid by banks in New York and Frankfurt was much lower than in London.
City AM (21/06/2019)
Late-payers to be frozen out of public sector contracts
As of September, firms that do not pay 95% of subcontractors within 60 days risk being frozen out of public sector procurement. The new rules force companies to report their payment data every six months to a national database overseen by the business department, with the measures part of efforts to tackle late payments to small businesses. The Federation of Small Businesses (FSB) estimates that problems linked to delayed payments see 50,000 companies shut every year. FSB chairman Mike Cherry comments: “The crackdown on big business suppliers who don’t pay promptly is welcome; those who fail to comply … should be in no doubt of the consequences.” Martin Traynor, the small business crown representative, said those who fail to pay up in a timely fashion may see themselves taken out of the running for public sector contracts. “If you can’t satisfy the people you are procuring, then you won’t be bidding for it,” he said.
Carney: Fintech may help small firm finance
Bank of England Governor Mark Carney has suggested a boost to start-ups is on the cards, saying the Bank is to open up its balance sheet to a new generation of payment providers. He also pointed to the potential for fintech to improve the ability of small businesses to access finance, noting that smaller firms face a £22bn funding gap. Mr Carney said that part of the issue stems from the fact the assets that small businesses seek to borrow against are “increasingly intangible” and that many lack the historic data that lenders require for credit scoring. Technology, he added, could give lenders and borrowers a broader set of information by looking at data generated by online activity.
Political uncertainty worries 1 in 4 SMEs
The latest BVA BDRC SME Finance Monitor shows that a quarter of UK SMEs see political uncertainty as the main obstacle facing their business. In London the proportion jumps to 33%, with the North East (30%) and West Midlands (27%) also exceeding the average. Stephen Pegge, managing director of commercial finance at UK Finance, said: “This survey suggests many small businesses across the country are increasingly concerned about the ongoing uncertainty over Brexit.” He added that the banking and finance industry is ready to support viable businesses, noting that 80% of finance applications from SMEs in the UK are successful, “showing that firms should be confident in approaching their bank to discuss any financing needs.”
Yorkshire Post (25/06/2019)
Budget deficit grows
Public borrowing rose by £1bn to £5.1bn last month compared to May 2018, figures from the Office for National Statistics show. Tax receipts rose by £1.9bn, with revenue from income tax and national insurance up by a combined £1.3bn. Britain’s deficit has reached £11.9bn for the financial year so far, with this total £1.8bn – or 18% – higher than it was for the same period (April-May) last year. The figures also show that the Government has spent net cash of £9.2bn this financial year so far. This is £8bn more than last year.