Chancellor warned over CGT hike, Analysts call for clarity on tax, Debt hits 100% of GDP for the first time since 1960s

THE HOT STORY

Chancellor warned over CGT hike

The Times ?

Businesses supported by BGF, the UK's leading private equity investor, have expressed concerns over potential cuts to investment if Chancellor Rachel Reeves raises capital gains tax (CGT) in the upcoming Budget. A survey of 58 companies revealed that 88% of executives view an increase in CGT as detrimental to entrepreneurship, with 74% anticipating a negative impact on their operations. The poll also saw 78% say a higher rate of CGT would influence their thinking on investment. Andy Gregory, BGF's chief executive, said: "What we're hearing of is an uncertain environment that business leaders are having to navigate," adding that this comes as they face "some very specific concerns that may, or may not, be contained in the Budget and could significantly impact growth prospects" for small and medium-sized enterprises. The Treasury has not confirmed any changes to CGT, but it remains a significant source of potential revenue, especially as the government has ruled out increases to income tax, National Insurance or VAT. The Office for Budget Responsibility estimates that the Treasury will raise ￡15.2bn in CGT this tax year, with this accounting for?1.3% of all tax receipts.?

ECONOMY

Analysts call for clarity on tax

City AM ?

City analysts are urging Chancellor Rachel Reeves to clarify potential tax increases ahead of the upcoming Budget, with some voicing concerns about the extent of possible hikes. Tom Selby, director of public policy at AJ Bell, said: "The lack of clarity has led to inevitable speculation about possible revenue-raising reforms to pension tax relief and tax-free cash, as well as capital gains tax.” Rachael Griffin, tax and financial planning expert at Quilter, has suggested that Labour could improve tax fairness by: simplifying and modernising gifting and inheritance tax laws to encourage “earlier wealth transfer”; offering clarity on pension-related tax changes to “help retirees avoid making rash, ill-advised financial moves”; and addressing the ‘cliff-edge' issue for families in the high earnings marginal tax trap. While Karl Williams, from the Centre for Policy Studies, warned that “looming tax hikes will only disrupt investment decisions, drive jobs overseas, and weaken Britain's ability to grow," British Chamber of Commerce director-general Shevaun Haviland said firms would be eager for more detail and “want to know where any increases in the tax burden are likely to fall.”

Debt hits 100% of GDP for the first time since 1960s

Sky News ? BBC News ? Financial Times ? The Daily Telegraph ? The Times ?

Figures from the Office for National Statistics (ONS) show government borrowing reached ￡13.7bn last month, ￡3.3bn more than in August last year and ￡2bn more than forecast. This takes borrowing for the current financial year to ￡64.1bn - ￡6bn higher than predicted in March. "Central government tax receipts grew strongly, but this was outweighed by higher expenditure, largely driven by benefits uprating and higher spending on public services due to increased running costs and pay," ONS chief economist Grant Fitzner said. The UK's public sector debt has now hit 100% of the value of the country's annual economic output for the first time since the 1960s with the latest public sector pay deals expected to push the figure higher. Commenting on the figures, Thomas Pugh, an economist at audit firm RSM UK, said: “This will make for some hard choices at the Autumn Budget next month.”

Chancellor: No return to austerity

BBC News ?

Chancellor Rachel Reeves has promised that there will be “no return to austerity” in the upcoming Budget, saying it will be a Budget “with real ambition, a Budget to fix the foundations, a Budget to deliver the change that we promised, a Budget to rebuild Britain." While Reeves offered little detail on the tax and spending decisions she will outline on October 30, she said there would be no increases in income tax, National Insurance or VAT. Taking an optimistic tone, the Chancellor said: “My ambition for Britain knows no limits because I can see the prize on offer if we make the right choices now.”

PM: ‘Not much room for tax rises'

Daily Express ? Daily Mail ?

Keir Starmer has sought to ease concern that the Budget will deliver a tax raid, saying that there is “not much room” for tax rises. With the government looking to plug a ￡22bn gap in the public finances, it has been speculated that ministers will look to hike taxes and cut spending. However, the Prime Minister said: “People have had a lot of tax rises and there's not much more room for tax rises.” Meanwhile, Chancellor Rachel Reeves has ruled out creating a new wealth tax, saying she was “not looking at creating some new tax, or a wealth tax.”

Chancellor faces tough tax decisions

The Daily Telegraph ? The Guardian ?

The Institute for Fiscal Studies (IFS) has warned that Rachel Reeves, the Chancellor, is facing significant challenges in her upcoming Budget due to her commitment not to raise the four main taxes that account for 75% of government revenue. The IFS said there was a danger the Chancellor would seek extra revenues from “economically damaging” tax rises that only bring short-term relief. Isaac Delestre, an IFS research economist, stressed the need for reform in the tax system, stating that “taxes on pensions, capital gains and inheritances – to name just three – are all crying out for reform.”

Family firms fear tax rises

The Times ?

A survey from Family Business UK shows that four out of five family-owned businesses do not believe Labour was honest with voters about its plans for?tax?rises in the lead-up to the election. Family businesses, which employ 13.9m people and contribute over ￡200bn in taxes annually, say they may resort to freezing recruitment or liquidating assets if tax breaks are reduced.?Neil Davy, chief executive of Family Business UK, has warned that the government risks "the future of British enterprise" by potentially withdrawing longstanding tax reliefs that facilitate the transfer of business assets without incurring hefty inheritance tax bills.?

Insurers contribute record tax

City AM ?

Members of the Association of British Insurers (ABI) contributed a record ￡18.5bn in tax to the UK’s public finances over the last financial year. Analysis by PwC shows that this marks a 9% increase on the year before, where total tax contributions from ABI members hit ￡17.2bn. The total for the 12 months to March 31 is made up of ￡4.1bn in VAT, corporation tax and employment taxes, with another ￡14.4bn coming through insurance premium tax, National Insurance contributions, tax deducted at source including pay as you earn on annuities and drawdowns. Susie Holmes, insurance tax leader at PwC UK, said: “ABI members are a major contributor to the UK’s economy and deliver growth and investment up and down the country.”

Cut taxes to stem depopulation in Wales, commission argues

The Daily Telegraph ?

The Labour-run Welsh Government is considering massive tax cuts to encourage young people to stay in their communities as the country face a brain drain and a collapse of public services. The Commission for Welsh-speaking Communities said targeted tax cuts could “boost economic and social activity” in areas suffering with depopulation. The Commission is urging the government to emulate a policy introduce in the Castilla-La Mancha region in Spain where residents in rural areas are offered a 25% income tax reduction to stay put. Reduced property and capital gains taxes are also on offer in Castilla-La Mancha.?But Chris Etherington, of tax firm RSM, said there was limited evidence that such a policy would be effective while Rachael Griffin at wealth manager Quilter warned the move could attract the wealthy, driving up property prices.

TAX RELIEF

AIM faces disaster if tax relief removed, City analysts say

City AM ?

City analysts warn that the London AIM market could suffer “irrecoverable damage” if Labour removes the inheritance tax relief on junior market stocks. Chancellor Rachel Reeves is rumoured to be considering this change in the upcoming Budget, which could lead to a significant market crash for small companies. The potential removal of this tax break could result in a loss of ￡14bn to ￡20bn in investor value, with 15% of AIM's total cash possibly vanishing overnight. Amisha Chohan from Quilter Cheviot stressed that the tax relief has been “instrumental in supporting UK small- and medium-sized growth companies.” The Institute for Fiscal Studies estimates that scrapping the relief could raise ￡1.1bn this year, but the negative economic impact could offset this gain.

LSE boss: Tax plan puts AIM at risk

City AM ?

London Stock Exchange chief executive Dame Julia Hoggett has warned the government that London’s junior market is under threat of collapse if taxes on its shares are hiked in the Budget. In a letter to City Minister Tulip Siddiq, Dame Julia said that the “ongoing viability” of AIM would be threatened by the rumoured move. She expressed concern at “the current fragility of the market,” saying that this anxiety “is shared by companies and fund managers across the market.” Amid speculation that tax relief on AIM could be scrapped in the Budget, investment bank Peel Hunt has calculated that such a move could see 15% of the cash in AIM withdrawn immediately, leading to a 20%-30% drop in the value of its stocks.

AIM faces sell-off if tax break axed, bank warns

Financial Times ?

Steven Fine, chief executive of Peel Hunt, has expressed concern over the potential removal of inheritance tax relief on AIM-listed companies, warning it could lead to a significant sell-off.

CAPITAL GAINS TAX

Wealthy investors urged to pay exit tax

The Daily Telegraph ?

The Resolution Foundation has urged Rachel Reeves to implement an "exit tax" on wealthy investors relocating abroad, as a response to a significant increase in the number of millionaires leaving the UK. The think tank's report suggests that the current capital gains tax exemption for those leaving for over five years should be scrapped. "An Australian-style exit charge should be introduced that levies capital gains tax when people move out of the country," the report states. The Henley Private Wealth Migration Report 2024 estimates that the UK could lose up to 9,500 millionaires this year, more than double the previous year's figure.

Landlords brace for tax hikes

Daily Mail ?

As the Autumn Budget approaches, landlords are reportedly increasingly concerned about potential hikes in capital gains tax (CGT), as Chancellor Rachel Reeves seeks to address a ￡22bn financial shortfall. Currently, higher-rate taxpayers face a 24% CGT, which could rise to 40% if aligned with income tax rates. Steven Cameron, pensions director at Aegon, observed: "The threat of more penal rates of CGT is prompting many landlords to consider selling rental properties."

CORPORATE

Blow for Vestager as UK wins fight against EU tax order

Reuters ?

Britain has successfully challenged an EU order to recover €13bn from various multinationals, including the London Stock Exchange and ITV. The European Commission had claimed that the UK's Controlled Foreign Company (CFC) rules provided an illegal tax advantage to these firms. However, the Luxembourg-based Court of Justice of the European Union (CJEU) ruled in favour of Britain, stating: "The Commission and the General Court erred in law in finding that the rules applicable to CFCs constituted the appropriate reference framework." It added: "The Court recalls that the Commission ... is in principle required to accept the Member State’s interpretation of the relevant provisions of its national law, unless it is able to establish that another interpretation prevails in the case-law or the administrative practice of that Member State.” This ruling is final and cannot be appealed, marking a significant setback for EU regulators in their tax enforcement efforts.

Corporate tax breaks cost more than they generate

The Guardian ?

Corporate tax breaks aimed at encouraging investment in new machinery are projected to cost taxpayers approximately ￡30bn while generating only ￡10.5bn in fresh investment, according to a report by Demos and Common Wealth. The Treasury claims that the full expensing initiative will lead to ￡15bn in investment, but this is still significantly less than the cost to taxpayers. The think-tanks advocate for reforms in corporate governance to prioritise investment over shareholder returns, suggesting that "the cost could be better spent on direct public investment." Andrew O'Brien, policy director at Demos, commented: "Full expensing is not the silver bullet to boost business investment that some had hoped."?A Treasury spokesperson said: "Permanent full expensing is forecast to grow the economy and it solidifies the UK's position as the joint most competitive country in the world for capital allowances."

EMPLOYMENT

Tax crackdown looms for freelancers

The Sunday Times ?

Self-employed workers are facing increased scrutiny from HMRC following a recent Supreme Court ruling that dismissed an appeal by Professional Game Match Officials Limited (PGMOL) regarding a ￡584,000 employment tax liability. The case, which revolves around the employment status of 60 referees, has raised concerns about a potential crackdown on freelancers. Waqar Shah from Kingsley Napley warned that the ruling could lead to "ramp up inquiries" into self-employed individuals. Elsewhere, David Klass from Hill Dickinson said that even without a final resolution, the court's decision about the contract could make it harder for self-employed people to get work. "There is a possibility that it will influence companies to err on the side of caution, and they may be more reluctant to engage with people on a self-employed basis," he said.

TAX AVOIDANCE

Superdry boss says Shein allowed to 'dodge tax'

BBC News ?

Superdry co-founder and chief executive Julian Dunkerton has asked the UK government to take action against Shein, alleging that the company enjoys an unfair advantage over its rivals because import duties are not charged on the low-value parcels it sends direct to customers from overseas.?Shipments worth less than ￡135 that are sent directly to UK shoppers do not face import duties, but firms bringing in larger consignments do. “The rules weren’t made for a company sending individual parcels [and] having a billion-pound turnover in the UK without paying any tax", he said.?"We’re allowing somebody to come in and be a tax avoider, essentially". Mr Dunkerton also described Shein as a "complete environmental disaster", stating:?"Personally, I would force them into paying import duty, VAT and possibly even an environmental tax".?An HM Treasury spokesperson said: “Our customs and tax regime balances reducing burdens for businesses and consumers buying lower-value goods from overseas with the interests of UK businesses."

HMRC

Freezing orders up 170% as HMRC targets criminals

City AM ?

The use of account freezing orders (AFOs) has surged by 170% over the last three years amid an HMRC crackdown on suspected criminal behaviour. Analysis by RPC shows that the number of AFOs has risen from 125 in 2021/22 to 341 in 2023/24, while the value of assets frozen increased from ￡43m to ￡57m. The number of forfeiture orders has also increased, rising from 92 in 2021/22 to 144 in 2023/24. AFOs were introduced in 2017 under the Criminal Finances Act, which allows a court to order bank accounts to be frozen for up to two years while the source of funds is investigated. Adam Craggs, partner and head of tax disputes at RPC, noted that since the introduction of AFOs, “we have seen HMRC invoking these powers on an increasingly regular basis, even though we know that in many cases they do not lead to a subsequent successful forfeiture of assets or criminal prosecution.”

HMRC loses case against Apostle client

BBC News ?

A man ordered to repay thousands of pounds after using a tax rebate scheme managed by Apostle Accounting has won his case against HMRC. The First-tier Tribunal (Tax Chamber) ruled that HMRC failed to follow proper procedures in their recovery attempts. Judge Nigel Popplewell noted that HMRC did not seek evidence to support their claims against Julian Lowe, who had used Apostle Accounting to file for tax-deductible expenses. Hundreds of former Apostle clients have been sent letters by HMRC demanding repayment after they made similar claims. Joanne Walker from the Low Incomes Tax Reform Group cautioned that this decision does not set a legal precedent for other Apostle clients, as each case is judged on its own merits. "In a similar case, HMRC may have properly documented their evidence-gathering," she explained.

Tax dodgers targeted

Daily Mirror ? The Sun ?

Chancellor Rachel Reeves has announced a significant initiative to recruit 5,000 investigators to combat tax evasion over the next five years. Officials are looking to close the ￡39.8bn tax gap, which represents 4.8% of total liabilities. The initiative, which will see 200 new investigators hired in November, aims to empower HMRC to recover lost revenue. A consultation on mandatory e-invoicing will also be introduced to deter tax dodging.?Wealthy individuals or businesses illegally evading tax, and criminals smuggling alcohol and tobacco, accounted for 24% of the tax gap in the 2022/23 tax year. The largest group were people failing to "take reasonable care" with their taxes (30%).

Tax agents arrested

The Times ?

Eleven individuals, including tax agents, have been arrested on suspicion of fraud related to research and development tax credits. These credits are designed to incentivise business innovation. HMRC officers conducted searches at various business addresses across Britain as part of the ongoing investigation into these alleged criminal activities.

NON-DOMS

UK non-doms size up European tax breaks in hunt for fiscal advantage

Financial Times ?

With the UK set to scrap the non-dom tax perk for wealthy residents, tax advisers across Europe have seen a surge in inquiries from individuals looking to relocate to secure similar incentives.

BUSINESS RATES

Government dashes hopes for business rates reform

The Sun ?

The Government has dampened hopes of a complete overhaul of the business rates system. Exchequer Secretary James Murray confirmed that any new system would still aim to raise the same amount of revenue, saying: "It's all about raising the same amount of money overall, that's the commitment." The Treasury is projected to collect ￡30bn from business rates next year, with retail contributing around ￡8bn. The British Retail Consortium warns that without a fairer system, 17,300 shops could close over the next decade. Retail leaders have warned that high rates hinder their ability to open new stores, with Jo Whitfield of Matalan describing business rates as a "real barrier" to retail sustainability.

INHERITANCE TAX

Inheritance tax receipts soar again

City AM ?

Inheritance tax receipts in the UK are set to reach record levels, with HMRC reporting ￡3.5bn collected between April and August, an increase of ￡300m from the previous year. The Chancellor, Rachel Reeves, is reportedly considering measures to further enhance revenue from this controversial tax, which currently stands at 40% on estates valued over ￡325,000. The government is also looking into closing loopholes, such as the inheritance tax break on AIM shares, which could potentially raise an additional ￡4bn but inflict “irrecoverable damage ” to London's junior market. Shaun Moore, a tax expert at Quilter, said there was a “strong argument for simplifying the system” so that it was more appealing to gift during one's lifetime, adding: “The complexity of the current system often leads to confusion and inequities.”

VAT

One in 10 wealthy families may leave UK over schools tax

The Daily Telegraph ? The Daily Telegraph ?

One in 10 wealthy families is considering moving abroad as a result of the government’s planned tax raid on private schools, according to wealth management company Saltus. The Wealth Index report polled?more than 2,000?high-net-worth individuals?in the UK with assets worth more than?￡250,000. Around?half?have children in private schools, and 10% of these said they are contemplating?relocating overseas?to avoid?Labour’s VAT hit on fees,?which will come into force from January 1.?Among all high-net-worth parents polled, 55% said they thought their child’s education would be disrupted as a result of the VAT raid. In total, 6% said paying school fees is their biggest concern.

TOURIST TAX

Edinburgh launches tourist tax consultation

Herald Scotland ? The Scotsman ?

City of Edinburgh Council has initiated a public consultation regarding a proposed tourist tax, aiming to generate over ￡100m by 2030. The visitor levy scheme would impose a 5% charge on overnight stays for a maximum of seven nights. Council Leader Cammy Day announced: “With the potential to raise tens of millions of pounds a year once it's established, a visitor levy for Edinburgh presents a huge opportunity for us to invest sustainably.” The consultation seeks input on which accommodations should be taxed, potential exemptions, and the allocation of funds raised. Before making a decision in early 2025, councillors will evaluate feedback from drop-in sessions and targeted meetings. The proposed implementation date for the tax is 24 July 2026, and the consultation is open until 15 December.

INTERNATIONAL

OECD sees total commitment to finalise global tax pact

Reuters ? The Times ?

The Organisation for Economic Cooperation and Development (OECD) maintains that there is "100% commitment among members to get it done" regarding a global tax pact aimed at highly profitable multinationals. Despite delays and hesitations from major countries, nearly 130 nations missed a mid-year deadline to finalise the treaty, which seeks to redistribute taxing rights primarily affecting large US digital firms like Google, Amazon, and Apple. OECD tax director Manal Corwin emphasised the urgency of finalising the agreement before the year's end. Meanwhile, the second pillar of the 2021 global tax deal is being implemented, establishing a 15% minimum corporate tax rate, with 19 countries already signing on to a treaty that allows developing nations to tax certain outbound payments.