Who’s saying what?
HMRC may see new powers in tax evasion battle
Measures proposed in the next Finance Bill will see HMRC given powers to issue financial institutions notices which force them to provide information about people’s assets. The mooted change will make it easier for HMRC to share information with foreign tax authorities, supporting efforts to tackle tax evasion. Under the current regime, consent is provided by the individual or a tax tribunal must approve the request. The proposed new powers, which would cover banks, investment advisers, fund managers, credit unions, insurance companies and credit card issuers, could come into force in 2021. While HMRC said the new powers would help prevent and uncover tax evasion and avoidance, the Chartered Institute of Taxation has voiced concern over “the loss of independent tribunal oversight, particularly in cases which involve requests for information about UK taxpayers”. Banking trade body UK Finance said the measure s signified a “watering down” of safeguards, saying authorities are looking for an “easy fix” to speed up tax investigations by cutting out the courts.
Source: Mail on Sunday (20/09/2020) City AM (20/09/2020)
HMRC’s IHT haul hits four-year high
HMRC pulled in £274m from 5,638 inheritance tax investigations in 2019/20, the highest total in four years. The average yield of almost £50,000 marks an increase of more than a fifth over the past three years. With analysis showing that HMRC now investigates around a quarter of estates that pay IHT, Rachael Griffin of wealth advice firm Quilter said the figures are “shockingly high” and suggest it has become “the norm for HMRC to investigate”. This, she adds, offers “a strong indication that something is amiss” within the “mind-bending complex system”. The Telegraph notes that the Office of Tax Simplification last year proposed sweeping reforms to make IHT easier to understand, while MPs have called for a “radical shake-up” of the levy.
Source: The Daily Telegraph, Money (18/09/2020) Daily Express (18/09/2020)
Migrants responsible for UK’s growth of top incomes and taxes
Highly skilled foreign workers contribute 8% of total income tax, according to HMRC data, and their increasing numbers explain most of the increase in income inequality over the past two decades. Almost four in 10 of the UK’s top 0.001% of earners are immigrants, despite being around 15% of the population. Arun Advani, the lead author of a paper by University of Warwick researchers, said he had suspected that migrants would be over-represented among high earners as many non-UK born people work in finance, technology and medicine, but he “was genuinely surprised” at the scale of the imbalance. Advani said the research could have an impact on decisions around a wealth tax as it shows many high earners could leave as they “often have less to tie them to the UK than people who were born here”.
Source: Financial Times (20/09/2020) The Daily Telegraph (20/09/2020) The Guardian (20/09/2020)
FSB backs shadow chancellor call to rule out tax rises
The shadow chancellor has said the Tories’ failure get a grip of COVID-19 and reform furlough is plunging the UK “deeper into an economic crisis”. Anneliese Dodds said “despite the extraordinary sacrifices of the British people, our country is still suffering more than many others”. Responding to Ms Dodds’ first conference speech as Labour’s finance chief, the Federation of Small Businesses National Chairman Mike Cherry, said: “It’s encouraging to hear the Opposition pledging to work hand in hand with small businesses at this incredibly difficult juncture. The Shadow Chancellor is absolutely right to call on government to rule out any tax rises in the immediate future – any hikes would seriously stifle our nascent economic recovery.”
Source: Daily Mirror (22/09/2020) The Press and Journal (22/09/2020)
Stamp duty holiday spurs rise in house sales
August saw house sales rise by 15.6% across the UK after the Government introduced a temporary stamp duty holiday. Sales rose by 15.6% in the month after climbing by 14.5% in July, figures from HMRC reveal. The tax break, which will last until March 31 2021, saw an estimated 81,280 sales take place in August and also helped to protect nearly 750,000 jobs in the housing sector and wider supply chain. However transactions were still down by 16.3% compared with the same month in 2019, figures show. Joshua Elash, director of property lender MT Finance, said: “The significant rise in house sales in August compared with the previous month reflects a positive response to the Chancellor’s stamp duty initiative in the short term but sadly, it is not sustainable.”
Source: The Times (23/09/2020) Daily Mail (23/09/2020) Yorkshire Post (23/09/2020)
HMRC set to bolster powers over asset disclosure
Efforts to crack down on tax avoidance and evasion could see HMRC handed powers enabling it to force financial institutions to reveal information about people’s assets without a court order.
Source: Financial Times (18/09/2020)
UK expands Kickstart jobs scheme to attract small businesses
The Government has opened its £2bn Kickstart jobs scheme to intermediaries following criticism that many small businesses would be left out. The scheme will pay employers’ costs for six-month work placements for 16- to 24-year-olds but companies taking on fewer than 30 new young workers were prevented from applying directly for funds. The Federation of Small Businesses is one intermediary given permission to help small businesses offering fewer than 30 vacancies apply for funding. The FSB has teamed up with Adecco Working Ventures to help facilitate applications. Thérèse Coffey MP, Secretary of State for Work and Pensions, said: “Small businesses are absolutely vital to our recovery as we build back better and a key part of the Kickstart Scheme. It’s great to have the Federation of Small Businesses and Adecco supporting them to take full advantage of our landmark Kickstart Scheme by becoming a national Kickstart gateway.”
Source: Financial Times (21/09/2020) Press Release (21/09/2020)
BBB chief vows to address funding gaps
The British Business Bank’s new boss Catherine Lewis La Torre has said she wants to double down on the development bank’s levelling up focus, and use the BBB to help the UK become a “science superpower”. The bank handed £8bn of finance to almost 100,000 firms in the last financial year – a 21% rise – and administered the emergency state-backed loans handed to businesses to ensure they survived the COVID-19 crisis. Ms Lewis La Torre said small business may need “bespoke solutions” and “hybrid” debt and equity rescues as they emerge from the crisis. The Telegraph notes that over 90% of finance supported by the BBB was delivered by non-traditional lenders.
Source: The Daily Telegraph (20/09/2020)
Small business recovery stalls
NatWest’s small business purchasing managers’ index shows the recovery among small firms slowed in August, with the lender saying there is a “widening gap” between big businesses and smaller firms. The index, on which a figure above 50 indicates expansion, fell to 50.6 in August, down from a two-year high of 53.3 in July. Stephen Blackman, NatWest’s principal economist, said small firms have been hit by a “mix of sector, place and distribution”. He added: “We know small firms tend to favour services, which have been slower to recover. But larger firms are also more likely to operate in national and even international markets, where places of uneven demand tend to average out.”
Source: City AM (19/09/2020)
CBI: New measures a blow to business
The Prime Minister said yesterday that tighter rules to prevent the spread of COVID-19 could last six months and the advice was that by next spring “things will be vastly, vastly improved.” But the director-general of the CBI, Carolyn Fairbairn, said the six-month timetable “will come as a shock” to business, adding reversing plans to bring more employees back to offices was a “crushing blow for thousands of firms”. Elsewhere, UKHospitality CEO Kate Nicholls described the fresh restrictions as “another crushing blow” for many businesses while lobby group London First said advising people to work from home risked “derailing an already fragile recovery”. Mike Cherry, national chairman of the Federation of Small Businesses, added that it was now vital that the Government “steps forward with an ambitious second round of support measures to help firms survive.”
Recovery threatened by new restrictions
Economists warn that the imposition of further Covid restrictions could mean growth flatlines over the last few months of the year. Paul Dales at Capital Economics says that the 10pm curfew on restaurants and bars and another homeworking push could mean GDP does not rise at all in October, November or December. Samuel Tombs at Pantheon Macro adds that if the Government ordered pubs, restaurants and other consumer businesses to close again then GDP would fall to 15% below pre-Covid levels as long as the restrictions lasted, compared to a 5% shortfall without them. The Telegraph’s Tom Rees proposes that if businesses fear ongoing stop-start restrictions they could be persuaded to hold back investment, pushing other businesses over the edge.
Source: The Daily Telegraph (23/09/2020) The Guardian (23/09/2020)
Bailey dismisses speculation on negative interest rates
Andrew Bailey, the Governor of the Bank of England, told a British Chambers of Commerce webinar on Tuesday that the resurging pandemic is “extremely difficult” news for the nation and warned that the “hard yards are ahead of us”. But he cooled expectations that the Bank of England will deploy negative interest rates in the immediate future after the Bank said on Thursday that it had begun “structured engagement on the operation considerations” of how negative rates would work. “It would be a cardinal sin if we stated we had a tool in the box, which in practice we didn’t think we could operationally use,” he said. Bailey went on to say Chancellor Rishi Sunak faces a difficult decision over the furlough scheme and hinted that it may need to become sector-specific.