A round-up of media tax highlights during the mourning period for Her Majesty Queen Elizabeth II
A round-up of media tax highlights during the mourning period for Her Majesty Queen Elizabeth II
Budget
A mini Budget to deliver tax cuts promised by Liz Truss during her Tory leadership campaign will take place on Friday, it is understood. Plans to hold the ‘fiscal event’ this month were thrown into doubt by the death of Queen Elizabeth II. The new PM has vowed to cut taxes to boost the economy and help people with rising living costs. Chancellor Kwasi Kwarteng could also set out the estimated cost of plans to cap energy prices. He will deliver his statement on Friday 23 September, four days after the Queen's funeral and the end of the official national mourning period.
BBC News Online (unattributed)
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Liz Truss’s plans for an energy price freeze and ‘sweeping’ tax cuts will give Britain’s richest households twice as much financial support with living costs as the poorest households, according to a leading thinktank. The Resolution Foundation said the prime minister’s energy package, announced hours before news of the death of the Queen last week, would come with a ‘colossal’ price tag for taxpayers that was poorly targeted to help those most in need when combined with tax cuts promised in her leadership campaign. It said the richest tenth of UK households would receive ￡4,700 in support, on average, from the Government’s ‘energy price guarantee’ and cuts to national insurance – far in excess of the ￡2,200 support for a typical household in the poorest tenth.
The Guardian (Richard Partington - economics correspondent)
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Kwasi Kwarteng is expected to cut the rate of National Insurance (NI). ?The rate of NI increased in April after a 1.25 per cent social care levy was brought in to fund the NHS, while July saw another change as former Chancellor Rishi Sunak raised the NI threshold to ￡12,570. When campaigning to become Conservative leader, new Prime Minister Liz Truss vowed to scrap the social care levy, meaning a third change to take home pay this year is on the cards. More changes will come in 2024, when the basic rate of tax is reduced from 20 per cent to 19 per cent. Tim Stovold, head of tax at Moore Kingston Smith, said: “Playing around with the tax or National Insurance rates in the middle of a tax year will always create some complexity in the tax system.” He added that reversing the policy and backdating the changes to April, would be the ‘simplest approach’ but also the most expensive one for the Treasury.
The Sunday Times (David Byers - assistant money editor)
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This commentary article says: “Cutting taxes marks a definitive break from the Conservative's austerity era. But many economists query if that will substantially revive growth. Analysts at Oxford Economics, using a model that mimics that of the Treasury, say that they would add just 0.1 per cent to the level of output of GDP by 2025. History says tax cuts rarely pay for themselves.”
BBC News Online (Dharshini David - global trade correspondent)
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CGT
The newspaper reports that young crypto investors have pushed up the capital gains tax bill of under-35s in the UK after cashing out of investments. In the past year, capital gains tax bills for the under-35s have more than doubled to ￡421 million, according to Growthdeck, a provider of tax-efficient investments. Amy Shrives, business development director at Growthdeck, said that youthful investors may find that large, and unexpected capital gains bills ‘can dampen the mood a little’. Mike Warburton, a leading tax accountant, added: “My concern is that many with gains will not be in self-assessment and won’t realise that they are obliged to notify HMRC by October 5th.”
The Times (Dominic Walsh - leisure and drinks reporter)
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Corporation tax
Some of the EU’s biggest member states have vowed to implement a planned global minimum corporate tax despite opposition from Hungary, which has refused to back the bloc’s proposals for the levy. In a joint statement, the finance ministers of Germany, France, Italy, Spain and the Netherlands pledged to introduce a minimum 15 per cent effective corporate tax rate in their own countries ‘swiftly’, adding that they wanted the new regime in place by 2023. Changes to EU tax rules usually require unanimity among member states, but some capitals have called for the tax plan to be implemented via a process called ‘enhanced co-operation’, meaning other member states could press ahead without Hungary’s approval or participation.
Financial Times (Sam Fleming - Brussels bureau chief)
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Business investment in the UK fell to the lowest rate in the G7 group of wealthy nations despite corporation tax cuts, the Government has been warned, as ministers prepare ￡30 billion of giveaways targeted at companies and higher-income workers. The Institute for Public Policy Research (IPPR) said a ‘race to the bottom’ on the headline tax rate on company profits had failed to boost investment and economic growth in Britain over the past 15 years.
The Guardian (Richard Partington - economics correspondent)
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Employment
The number of Brits who are economically inactive — not in work and not looking for work — topped nine million in the three months to July, ONS figures showed last week. This means the inactivity rate is at its highest since early 2017. Analysis shows that more than 60 per cent of the rise has been driven by the exit of those aged 50 to 64 from the jobs market, with 386,000 workers in that bracket leaving since the start of the pandemic. While it is expected that the cost-of-living crisis will drive many less well-off retirees back into the workforce, 2021 research from insurer Aviva found that two-thirds of early retirees were happier since leaving work, despite almost half reporting that their finances had taken a hit. Meanwhile, the ONS figures also show that an extra 352,000 people were out of work due to long-term sickness in the three months to July 2022, compared with pre-pandemic levels.
The Sunday Times (Anna Menin - professional services correspondent)
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Successive hiring sprees are set to hit the buffers, according to the latest BDO Employment Index. The latest business trends report suggest the UK labour market is set to see an end to its 10-month streak in positive hiring intentions following a dip in productivity and growing recessionary fears. The index has seen an increase each month since October 2021, increasing 0.53 points to 115.33 in August. This was driven by record payroll numbers.
The Business Desk (Neil Hodgson – business journalist)
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Energy
The EU executive plans to raise about €140 billion (￡121 billion) by imposing windfall taxes on energy companies’ ‘abnormally high profits’ and redirecting proceeds to households and businesses struggling with soaring bills. Announcing long-awaited emergency measures to tackle the rising price of electricity, the EU official in charge of the green transition, Frans Timmermans, said the plans were a necessary response to energy supply shortages and high prices.
The Guardian (Jennifer Rankin and Alex Lawson)
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The royal family stands to benefit from a huge windfall from the boom in offshore energy, potentially sparking a debate about funding the monarchy. The Treasury has confirmed that an official review of the sovereign grant, which stands at ￡86.3 million a year, is ongoing and is expected to come into effect from April next year. Officials say they want to ensure the funding is at ‘appropriate’ levels.
The Guardian (Jon Ungoed-Thomas – reporter)
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Environment
The world’s most vulnerable countries are preparing to take on the richest economies with a demand for urgent finance – potentially including new taxes on fossil fuels or flying – for the irrecoverable losses they are suffering from the climate crisis, leaked documents show. The funds could be raised by a global carbon tax, a tax on airline travel, a levy on the heavily polluting and carbon-intensive bunker fuels used by ships, adding taxes to fossil fuel extraction, or a tax on financial transactions.
The Guardian (Fiona Harvey - environment correspondent)
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HMRC
The UK tax authority’s ‘aggressive’ and scattergun approach to curbing fraud in a tax credit scheme risks stifling a policy aimed at boosting software and manufacturing innovation among businesses, advisers have warned. The research and development tax relief scheme enables small companies to claim between one-quarter and one-third of their spending on specific projects. A rise in fraudulent claims has seen HMRC this year issue more than 1,000 letters in response to claims flagged by its system as ‘high risk’. But according to specialists, the increase in bad actors seeking to exploit the tax credit scheme has led to a poorly targeted crackdown by HMRC and long delays in the payment of legitimate tax credits, hitting cash flow.
Financial Times (Mary McDougall – acting tax correspondent)
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Jamie Ritblat’s employee trust paid ￡400 to settle tax claim. Now HMRC wants millions more (paywall)
Property tycoon Jamie Ritblat is battling the UK’s tax authority over tens of millions of pounds that HMRC claims is owed by him and his real estate investment firm, Delancey. HMRC claim income and employment-related taxes are owed on ￡141 million of profits from Delancey’s flagship fund that was paid from a trust to 24 employees, including Ritblat. The payments began months after HMRC accepted just ￡400 in a 2015 settlement that barred the agency from collecting further taxes from the trust’s beneficiaries or Delancey. HMRC now allege the deal was agreed on the basis of misrepresentations made by Delancey and the trust through advisers EY and law firm Olswang during the settlement negotiations.
Financial Times (Kadhim Shubber and George Hammond)
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IHT
King Charles will not pay tax on the fortune he has inherited from the late Queen, although he has volunteered to follow his mother’s lead in paying income tax. Under a clause agreed in 1993 by the then prime minister, John Major, any inheritance passed ‘sovereign to sovereign’ avoids the 40 per cent levy applied to assets valued at more than ￡325,000. The crown estate has an estimated ￡15.2 billion in assets, of which 25 per cent of the profits are given to the royal family as the sovereign grant. The estate includes the royal archives and the royal collection of paintings, which are held by the monarch ‘in right of the crown’.
The Guardian (Daniel Boffey - Brussels bureau chief)
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‘Investment zones’
Liz Truss is planning to levy lower tax rates and strip out regulations in certain parts of the country picked by the Government. The prime minister is reportedly planning to badge the areas ‘investment zones’ – and will claim that the approach could boost economic growth. Businesses based in the handpicked regions will be able to ignore some environmental regulations and pay lower rates of tax. And workers living there could pay personal income taxes and national insurance at reduced rates.
The Independent (Jon Stone - policy correspondent)
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Pensions
A freeze on the lifetime allowance means pension savers face an extra ￡165,000 on their tax bill. In 2021, then Chancellor Rishi Sunak froze the upper limit at ￡1,073,100 for five years. Due to inflation, pensioners will have lost 27 per cent of their lifetime allowance in real terms. Without the freeze, the lifetime allowance would have increased to ￡1,372,600, according to pensions experts at Aegon. The threshold will fall by ￡234,000 to ￡839,131 if inflation remains at 10 per cent next year and then falls back down to two per cent in 2024, as predicted by the Bank of England. Andrew Tully of pensions group Canada Life has described the allowance as a ‘draconian measure’ that hits even those saving relatively modest amounts.
Daily Telegraph (Jessica Beard - senior personal finance reporter)
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The profession
The UK’s accounting sector’s turnovers continued to grow over July as the industry bucked trends towards plummeting revenues in the wider services sector. The accounting sector’s turnovers increased 0.69 per cent from June to July, to heights of ￡3.54 billion, figures from the Office for National Statistics (ONS) show. The growth saw the sector’s revenues increase 16.65 per cent over the previous year, as accounting firms continued to profit from volatile economic conditions.
City AM (Louis Goss – reporter)
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VAT
OnlyFans has been told by EU court advisors that it may need to fork out VAT on the full amount paid by subscribers, not just a discounted sum. OnlyFans’ parent firm Fenix took an initial grievance about VAT to a UK tribunal after HMRC ordered the UK based firm to pay VAT on all the money paid by fans and not just the amount minus 80 per cent paid to creators. The alleged unpaid VAT bill from HMRC covers almost four years, and courts documents published in December 2020 suggested the company would be set to cough up to ￡11 million in unpaid taxes.
City AM (Leah Montebello – reporter)
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Other
Taxes are ‘an often misunderstood’ tool of social justice and should not be seen as an example of a government overstepping its powers, Pope Francis told an audience of Italian business leaders. In his speech, the pope also urged business leaders to share their wealth in other ways, including through charity, sticking to fair wage policies and creating new jobs, particularly for young people. “The tax system and administration must be efficient and not corrupt. But taxes should not be considered as usurpation,” he added.
Reuters (unattributed)
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Interest rate hikes by central banks around the world could trigger a global recession in 2023, the World Bank has said. Central banks have raised rates ‘with a degree of synchronicity not seen over the past five decades’ to tackle soaring prices, it said. Raising rates makes borrowing more expensive to try to bring down the pace of price rises. But it also makes loans more costly, which can slow economic growth. The warning from the World Bank comes ahead of monetary policy meetings by the US Federal Reserve and Bank of England, which are expected to increase key interest rates next week.
BBC News Online (Annabelle Liang - business reporter)
By Hamant Verma