Pension tax rethink worth ‘hundreds of millions’
With the Treasury reportedly considering plans to raise the point at which restrictions to the pensions annual allowance kick in by £40,000 to £150,000, former pensions minister Sir Steve Webb has said such a move would hand “hundreds of millions in tax relief to tens of thousands of people”. Sir Steve says the tapered annual allowance is a “bad tax and bad law”, which “you just have to get rid of”. He added that the UK has a “really complicated” tax system and that the tapered annual allowance is “unpredictable, capricious and has cliff edges.” Analysts say the mooted change would mostly affect those paying the 45% top rate of income tax. HMRC figures show that the number of pension savers paying tax after breaching the annual allowance limit reached a record high in the 2017/18 tax year, with £812m of pension contributions made in excess of the a llowance. Commenting on the proposed rethink, former shadow pensions minister Gregg McClymont, of The People’s Pension, urged ministers to hold a “long awaited and much needed” comprehensive review of the way pensions tax operates. If the Treasury agrees the overhaul, an announcement is expected by Chancellor Sajid Javid in the Budget in March.
Source: The Daily Telegraph (16/01/2020) Daily Mail (16/01/2020) The I (16/01/2020) Daily Express (16/01/2020)
HMRC reveals ‘weird and wonderful’ tax return excuses
HMRC has revealed some of the more unique excuses taxpayers have given for missing the self-assessment deadline over the past decade. One person claimed to have been cursed by their mother-in-law while another blamed their hamster, saying it had eaten their post. The list of “weird and wonderful” excuses, released ahead of the January 31 cut-off, also details how a DJ said they had been too busy partying in a bowls club to file a return, while someone else said they were unable to collect the forms as they were cruising round the world in their yacht. The taxman also detailed some of the most bizarre claims that had been submitted, including one for tax relief on 250 days’ worth of sausage and chips meals. Angela MacDonald, HMRC director general of customer services, said: “We always offer help to those who have a genuine excuse. It is unfair to the majority of honest taxpayers when others make bogus claims.”
Source: The Daily Telegraph (17/01/2020) The Times (17/01/2020) Daily Star (17/01/2020) The Sun (17/01/2020) The I (17/01/2020) Daily Express (17/01/2020) The Scotsman (18/01/2020)
Firms’ cashflow boosted by holding onto tax
The Times’ Patrick Hosking details how delaying passing tax they have collected onto the taxman is a vital part of many firms’ cashflow. He notes that about £400bn a year of taxes and duties paid by consumers and employees are actually collected by businesses, highlighting that income tax through PAYE raises £16bn, VAT raises £15bn, and excise duties pull in £50bn. While each tax has different rules and schedules for delivery to HMRC, in most cases businesses hold the money for anything from a fortnight to four months. Mr Hosking says that while no-one – including the taxman – “has the first clue as to the overall cost to the public purse or the cashflow advantage it gives business … a simple back-of-the-envelope calculation suggests it could be very large.” John Cullinane, policy director at the Chartered Institute of Taxation, says the time-to-pay initiative has allowed many companies to defer passing on taxes well beyond official deadlines.
Source: The Times (20/01/2020)
Small firms miss out on tax breaks
Research by digital bookkeeping app Receipt Bank has found that half of business owners feel overwhelmed by the amount of paperwork they need to deal with, and one in five say this slows their growth. A further 33% have suffered a financial loss from not filing all the paperwork demanded by HMRC while a quarter didn’t know that claiming business expenses could help to reduce their corporation tax bills. Rebecca Freeman, accountant at Receipt Bank, said: “Tax breaks exist to help small businesses invest and grow. Those that forgo their entitlements are putting themselves at a competitive disadvantage.”
Source: Daily Mirror (22/01/2020)
Small firms in poor regions lose out on loans
Analysis by business lender Iwoca suggests that small business lending has slipped in England’s most deprived areas. With lending to UK SMEs falling by 8% between 2014 and 2018, the country’s poorest regions are among the worst hit, with Blackpool – England’s most deprived area according to Government statistics – seeing a 31% fall. The analysis shows that SMEs in the wealthiest areas of England were able to borrow £41bn more than those in the poorest parts.
Source: Daily Mail (17/01/2020)
Tech tax could hit small businesses, Amazon warns
Amazon’s UK boss has warned that the new 2% digital services tax could impact small UK businesses. Douglas Gurr, Amazon’s UK country manager, said the tax would not impact plans to create new jobs and open more distribution hubs but cautioned that the retail giant could offload the additional costs by raising charges for the small businesses that use its platform.
Source: City AM (17/01/2020)
SMEs plan to spend £1.7bn
A survey by finance firm Together has found that British SMEs are set to invest £1.7bn over the next two years, with subsiding Brexit uncertainty seeing firms more willing to spend. The poll saw a quarter of SME bosses say they will look to expand their premises, while 23% expect to hire new staff. With the decisive election outcome offering more certainty, 42% of SMEs are now optimistic about their prospects, compared with just 8% who would have been optimistic if the uncertainty had continued. Andrew Charnley of Together said: “The investment taps can now be turned back on.”
Source: Daily Star (20/01/2020) Daily Express (20/01/2020)
Inflation falls in December
Inflation fell to its lowest for more than three years in December. The rate dropped to 1.3% last month, down from 1.5% in November, with December’s inflation rate the lowest since November 2016. Analysts suggest the data increases the chances of a cut to interest rates, with inflation below the Bank of England’s (BoE) target of 2%. Melissa Davies, an economist at stock broker Redburn, said: “Very soft UK inflation data for December leaves the door wide open for a Bank of England rate cut on 30 January.” Michael Saunders, one of the rate setters on the BoE’s Monetary Policy Committee, has called for interest rates to be cut to combat the risk of the UK getting stuck in a “low inflation trap.” Mr Saunders, who voted for cuts in November and December, said: “It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target”.