Regulator proposes Big Four share audits with challenger firms
Sky News reports that the Financial Reporting Council (FRC) has drawn up proposals for audit reform that would require all but the largest FTSE 350 companies to allocate a substantial minority of their audit work to a challenger firm if the main work was being undertaken by one of the Big Four – Deloitte, EY, KPMG or PwC. Under the “managed shared audits” regime, the regulator would be given the power to intervene to ensure an appropriate proportion of work was given to one of the smaller firms, such as BDO, Mazars or Grant Thornton. The main auditor would retain responsibility for signing off group accounts. The recommendations constitute a formal response to the Competition and Markets Authority’s proposal that there be a “mandatory joint audit,” sources say, with City figures declaring it a sensible compromise. Sky News also reports that the FRC is considering a plan to operationally separate the audit and consulting arms of the Big Four without requiring a full legal break-up of the firms. The Times reports that the CMA has repeated its call for a breakup of the Big Four following news that the accounting firms are in talks with the FRC over developing measures that could pre-empt such an outcome. The paper reported earlier last week that the separation of audit and consulting divisions has been a topic of discussion between the FRC and the Big Four.
US and France agree deal on digital tax
The US has dropped its insistence that any international digital taxation agreement should be optional, bringing to an end a tussle between the US and France and paving the way for a global deal in 2020. The secretary-general of the OECD, Angel Gurría, said the negotiating process was back “on track” and he hoped countries would make progress in the next phase of negotiations in Paris this week. But Paris insists digital companies in France will pay their due taxes in 2020 despite allowing more time for an international solution. An FT editorial contends that the UK should join France and implement its own digital tax but suspend the collection of revenue while a deal with the OECD is thrashed out. Elsewhere, the Telegraph’s Jeremy Warner rails at the design of the digital services tax, arguing that shifting the basis for the tax from profit to revenues fails the key tests a new tax should pass: that it be “fair, equitable, simple, transparent and economically efficient.”
HMRC spearheads worldwide tax fraud probe
HMRC has helped spearhead a global day of action against the suspected tax evasion and money laundering of more than £200m in the UK alone. The action occurred as part of a series of investigations with allies into a Central American financial institution, whose products and services are believed to be facilitating tax evasion and money laundering for customers across the globe. It is believed that through this institution, a number of clients are using a sophisticated system to conceal and transfer wealth anonymously, to evade their tax obligations and launder the proceeds of crime. This is the first major operational activity for the Joint Chiefs of Global Tax Enforcement (J5), which was established to tackle international tax crime and money laundering.
Source: Press Release
Millionaires accused of hypocrisy after pleas for higher tax
Former Unilever boss Paul Polman, Innocent Smoothies co-founder Richard Reed and US real estate developer Jeff Gural have all signed a letter calling for higher taxes on millionaires and billionaires. But they have been accused of hypocrisy by campaigners who say they previously sought specific tax breaks for their businesses. The letter was also signed by actor Simon Pegg, director Richard Curtis, heiress Abigail Disney and Julian Richer, founder of UK record chain Richer Sounds. The plea elicited this response from Matthew Lesh, head of research at the Adam Smith Institute: “We’ve all had enough of millionaires lecturing the rest of us about not paying enough tax. If these hypocrites really want to pay more, the Treasury will happily take their spare dosh.”
Source: The Daily Telegraph (24/02/2020) The Times (24/02/2020)
Denise Coates tops Tax List 2020
The second edition of The Sunday Times Tax List has been published, with Harry Potter author JK Rowling, inventor Sir James Dyson and the pub tycoon Tim Martin named among 50 individuals and families who have together paid almost £2.5bn of tax in a year. Denise Coates and family, who run the gambling company Bet365, top the list with an estimated tax bill of £276m for 2018-19 – almost twice as much as any other entry on the list. Last year’s inaugural Tax List prompted some companies to include more detail in their financial statements to improve their standing, the paper points out.
Reeves pledges ‘genuine’ audit reform
The Labour MP Rachel Reeves has been re-elected unopposed as chairwoman of the Commons business select committee. She told the Times that she would continue to press for substantial reforms of the audit profession. Ms Reeves said a proposed agreement between the Big Four and the Financial Reporting Council for an operational split of their audit and consulting divisions would not constitute “genuine reform”. Last year her committee called for a full legal split of the Big Four’s audit and non-audit services to avoid a repeat of major corporate collapses such as Carillion. Accountants have been accused of allowing the huge fees they can earn from non-audit work to influence their reporting.
Source: The Times (28/02/2020)
ACCA and Charity Commission sign sharing agreement
The Charity Commission and the Association of Chartered Certified Accountants (ACCA) have signed an information sharing agreement that will now see the Commission refer cases of poor professional practice by accountants and finance professionals to the ACCA. The Commission’s ultimate purpose in signing up to the agreement is to provide a mechanism to alert ACCA to poor practice and, by raising the standards of ACCA practitioners undertaking external scrutiny work for charities, help charities comply with their accounting framework and legal requirements. Laura Murphy, Standards Manager of ACCA, said: “Through this partnership, ACCA aims to support our members working in the charity sector to uphold the highest of ethical and professional standards, meet their statutory responsibilities and act in the public interest.”
Source: GOV (25/02/2020)
Philip King takes over as small business commissioner
Credit management expert Philip King is to take over as interim small business commissioner replacing Suzanne Burk, who has been holding the fort since the departure of Paul Uppal. Mr King was chief executive of the Chartered Institute of Credit Management, which was responsible for running the prompt payment code, and he will now be charged with transferring the administration of the code. Kelly Tolhurst, the small business minister, said: “In Philip, small businesses will have a real champion with a proven track record of tackling late payments.” SMEs are owed a total of £23.4bn in overdue bills, an increase of £10.4bn on 2018, according to BACS.
Source: The Times (27/02/2020)
RBS sets aside £1bn for female entrepreneurs
Alison Rose has launched a £1bn fund to support women entrepreneurs. The Royal Bank of Scotland CEO has set a target for the bank to help create 50,000 businesses in the next three years. Before she got the top job at RBS, Ms Rose conducted a government-backed review into funding for female entrepreneurs finding less than 1% of all venture capital funding goes to female business owners. “It doesn’t matter what gender an entrepreneur is,” she said. “But if there are barriers in the way, we should do something about it.”
Source: Daily Mail (24/02/2020)
Small firms increasingly occupy FCA
The Financial Services Authority says small businesses are taking up ever more resources as the number under the regulator’s oversight reaches 58,000 – more than double the number overseen by the FSA when it was dissolved in 2013. Andrew Bailey, the chief executive of the FCA, said on a podcast: “I don’t want for a moment to pretend that the big firms are virtuous all the time, because they’re not, but relatively speaking, and I emphasise ‘relative’, the challenge for us has shifted.”
Source: The Times (25/02/2020)
UK government warned against cutting ‘entrepreneurs’ relief’ in Budget
Business groups have said there was room for reform of “entrepreneurs’ relief” but cautioned against sweeping changes following reports that the measure will be targeted in the March Budget. Sajid Javid is reportedly drawing up plans to limit the tax break amid concerns it is overly generous to the wealthy.
Source: Financial Times (28/02/2020) City AM (28/02/2020)
Output grew at the fastest rate for 16 months in January
The UK composite purchasing managers’ index (PMI) compiled by IHS Markit shows manufacturing and services saw their best month for more than a year in January. The IHS Markit/CIPS PMI for services showed the sector returning to growth for the first time since August 2019, rising to 52.9 from the previous month’s 50.0. Any score above 50 indicates expansion. Manufacturing continued to contract, but at a slower pace. Its PMI reading rose to 49.8 from December’s 47.5.
Source: BBC News (25/02/2020) Daily Mail (25/02/2020) The Guardian (25/02/2020) The Sun (25/02/2020)
Financial services facing training and culture crisis
Britain’s financial services industry is facing an “existential skills crisis” according to a report from the Financial Services Skills Taskforce, chaired by Mark Hoban. Rapid technological changes, a lack of diversity and too few top graduates coming into the sector is putting the industry at risk. The former City minister also said that the financial services industry was lacking the “vision, co-ordination and focus needed to weather the megatrends transforming global business”. John Glen, economic secretary to the Treasury and City minister, said: “The industry needs to invest further in skills, boost diversity and ensure we’re training the next generation of leaders and innovators.”
Source: The Times (28/02/2020) City AM (28/02/2020) The Daily Telegraph (28/02/2020)