Report flags inequality in pensions tax relief
The Association of British Insurers has called for reform of pensions tax relief, saying the existing system widens inequalities between the sexes and different generations. It says analysis shows that lower earners and young workers are missing out on tax relief even though more are saving for a pension. Research by the Pensions Policy Institute think-tank found that workers earning less than £50,000 made up 83% of all taxpayers but received only a quarter of the pensions tax relief paid in relation to defined contribution pensions. The report concluded that the system favours higher earners, with the proportion of people who earn less than £30,000 but qualify for tax relief increasing from 52% to 62% due to automatic enrolment – while just 24% of tax relief goes to those in this bracket. It was also found that men are granted 71% of all pensions tax relief as they pay 69% of the contributions. The study shows that 42% of those who contribute to a defined contribution pension are under 40, yet this group only receives 27% of the available tax relief, while those in their 40s and 50s typically receive two and a half times as much tax relief.
Source: The Daily Telegraph (29/06/2020)
IFS: VAT cut would help spark recovery
A report from the Institute for Fiscal Studies (IFS) backs calls for the Chancellor to introduce a temporary cut in VAT when he unveils a mini-Budget next month. The think-tank says cutting VAT would have a double benefit for the economy by “putting money in people’s pockets” immediately and encouraging consumers to bring forward spending. However, Rishi Sunak should also consider that the move might be more effective later in the year. Separately, the FT’s Chris Giles calls on Chancellor Rishi Sunak to introduce a temporary lower rate of VAT on pubs, restaurants, hotels and tourist attractions, dropping it from 20% to 5%.
Source: Daily Mail (25/06/2020) Financial Times (25/06/2020)
Support grows for tax rises over austerity
A YouGov poll shows a reversal in public support for cutting back services to repair public finances, with 47% of respondents backing tax rises as a means to reduce the gap between government spending and what it raises in tax, up from 30% in December 2009. The poll saw 63% of people say they would support increased tax to fund the NHS, up from 48% in a 2014 poll. Support for tackling the deficit mainly through spending cuts has fallen from 52% to 27%. This comes with Institute for Fiscal Studies analysis suggesting that borrowing could this year exceed £300bn.
Source: The Times (29/06/2020)
PM will not rule out tax increase
Prime Minister Boris Johnson has not ruled out increasing taxes in a bid to help foot the country’s coronavirus bill. Asked whether taxes could rise, he said: “You know where my instincts are, what I would like to do. They are, of course, to cut taxes wherever you possibly can, but the difficulty we have is that we have a generational challenge now.” The PM said: “I remain absolutely determined to ensure that the tax burden, in so far as we possibly can, is reasonable and that we continue to be a dynamic, competitive, open market economy.” An increase would go against a Conservative manifesto pledge not to raise income tax, national insurance or VAT.
Source: The Guardian (01/07/2020) The Times (01/07/2020) The Independent (01/07/2020)
Half of accountants feel CBILS process is ‘too long’
Around 50% of accountants feel that the Coronavirus Business Interruption Loan Scheme (CBILS) application process and the time it takes to get a response is “too long”, according to a new survey from adviser-led funding platform Capitalise.com. Some 50% of accountants also suggested that insolvency and recovery, dispute resolution and company valuations will be a key feature of their work in the coming six months. The research also showed 90% of the accountants surveyed confirmed that they have helped their clients access CBILS over the past few months, with 65% confirming they are not charging an additional fee for the service.
Source: Accountancy Today (26/06/2020)
Why a pandemic is a good time start a new practice
Consultant Delia Hudson, author of The Numbers Business and former owner of Hudson Accountants, argues that the coronavirus pandemic represents the ideal time to launch a new practice. In difficult times, she says, business owners need cashflow forecasts to manage their spending and decision making; business plans to apply for loans; updates on government advice regarding the various types of financial support available; and guidance on when it might be necessary to reinvent their companies.
Source: ICAEW (25/06/2020)
UK small business investment soars to £8.5bn
The British Business Bank’s annual Small Business Equity Tracker report shows investment in UK tech businesses rose by 27% last year to hit £4bn – the highest level for eight years. The study found that 52% of deals took place outside of London, with the south west of England, Scotland and Northern Ireland showing a strong increase in 2019, rising by 34%, 26% and 24%, respectively. Meanwhile, equity investments into UK “growth stage” companies rose by 39% to £5.3bn. Keith Morgan, chief executive of the British Business Bank, said: “The UK’s small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn. This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.” Matt Adey, director of economics at the British Bu siness Bank told City AM that there had been “a fair bit of activity in April and there were still deals being done even in May,” despite the coronavirus lockdown.
Source: P2P Finance News (25/06/2020) City AM (25/06/2020)
Late payment crisis deepens through lockdown
The Federation of Small Businesses (FSB) has called for the Government to bring an end to the late payment crisis which has been worsened by the coronavirus crisis, saying large corporations that have received help from the Government amid the pandemic should be forced to pay their suppliers within a month. A new report from the FSB reveals that 62% of small businesses have been subject to late or frozen payments in the wake of the COVID-19 outbreak, despite only 10% agreeing to altered payment terms with clients. The study also shows that there is no discernible difference in late payment activity between public and private sector supply chains. Late payments due across the country rose 80% to £23.4bn at the end of last year. The FSB says now is the time for the long-awaited review of the Prompt Payment Code, with national chairman Mike Cherry saying: “The Government promised to act a year ago. Time is running out – we need to see delivery.”
Source: The Times The Scotsman
SME’s ‘bobbing on a on a sea of cheap credit’
Bank of England figures show that SMEs borrowed £18.2bn more than they repaid in May, exceeding the previous record of £589m seen in September 2016. Much of this was related to the Government’s Bounce Back Loan Scheme, a coronavirus support initiative which was launched in May. As of June 21, £28.1bn had been loaned under the scheme. Jack Izzard, director of support group The Great British Bounce Back, warns that “tens of thousands” of SMEs are “bobbing precariously on a sea of cheap credit”.
Source: Daily Mail (30/06/2020)
Crisis prompts innovation
A survey by Be The Business suggests that the coronavirus crisis and resulting lockdown have driven small businesses to innovate, with more than half a million having changed or currently altering their operating model and a fifth introducing new services. Be The Business CEO Tony Danker said the early signs of an economic recovery can be attributed in part to this push toward innovation.
Source: The Daily Telegraph (01/07/2020)
Economy sees worst contraction since 1979
The UK economy shrank more than first thought between January and March, contracting 2.2% where the Office for National Statistics (ONS) had estimated a 2% dip. This marks the biggest quarterly contraction since Q3 1979. Jonathan Athow, deputy national statistician at the ONS, said that all main sectors of the economy shrank “significantly” in March due to the hit from the COVID-19 pandemic. The services sector – which accounts for about three-quarters of UK GDP – shrank by a record 2.3% in Q1, with production down 1.5% and construction slipping 1.7%.
Source: BBC News
Record bank deposits in May
BoE data show that UK households’ bank savings increased by a record amount last month, with deposits up £25.6bn in May to £1.5trn. Households have banked £57bn since March, the analysis reveals. The figures also show that repayments on consumer credit dropped to £4.6bn in May, down from £7.4bn in April. Samuel Tombs of Pantheon Macro said spending is likely to rebound over the summer, with reopened shops and businesses drawing consumers, but predicts that consumer spending will still be 5% below pre-virus levels by Q4, even if there is no second wave of coronavirus infections. BoE analysis also shows that there were just 9,300 mortgage approvals in May, down from almost 16,000 in April and 87% below February’s total
Source: The Daily Telegraph (30/06/2020) Financial Times (29/06/2020)