IHT at record highs, HMRC Chief quits, Bowie’s golden years, record tax return filings over Xmas, and more

Tax

UK families paying inheritance tax at a 35-year high – Rising house prices have pushed the number of UK families paying IHT to a 35-year high, according to figures from the Office for Budget Responsibility. The OBR has estimated that 40,100 bereaved families will face tax on their inheritance in the current tax year, rising to 45,100 in 2016-17 – the largest number since 1979-8 – but this number is likely to fall when the additional allowance for family homes takes effect in April 2017. The current £325,000 threshold, over which a tax rate of 40% applies, has been static since 2009, another contributory factor in the rise. Exchequer revenues from IHT are expected to hit £4.4bn in 2015-16 and £5.6bn by 2020-21, despite a reduction in the numbers subject to IHT by then.

Chancing their luck – The Independent’s Geoffrey MacNab previews Chancers, a documentary on BBC4 on 24 January, which details how tax relief for the film industry has been used for fraudulent purposes. It reveals how two novice producers of a small British film called A Landscape of Lies were caught by HMRC when it found the movie was a sham designed to defraud the taxman of £1.5m in VAT. The producers, who were convicted in 2013, were the first to be prosecuted for film tax-relief fraud.

Plan for pension relief changes now – The Telegraph’s Richard Dyson predicts that the Chancellor will use his March 16 spring budget to drop the higher rate of tax relief on pension contributions. He suggests George Osborne may introduce the measure by declaring that no contributions from that date will attract relief at the higher rate, relieving pension providers, accountants and HMRC of panicked savers scrambling to pour cash into pensions. Mr Dyson advises higher-rate taxpayers still contributing to pensions to rethink their finances for 2016, with this scenario in mind.

B2L landlords switch to companies to avoid tax changes  – New figures show that buy-to-let landlords are circumventing the loss of their ability to deduct mortgage interest from their tax bills, and a 3% stamp duty surcharge from April 2016, by purchasing properties through companies. Companies now account for more than a third of buy-to-let mortgage applications, up from 15% in October. Those who own properties through a company will still be able to deduct mortgage interest, will pay 20% corporation tax, instead of income tax of up to 45%, and will be exempt from the stamp duty change if they own 15 properties or more.

HMRC chief executive to quit – Lin Homer is to step down in April, the government has announced. Ms Homer’s departure after four years in charge of the UK tax office comes just weeks after she was awarded a damehood in the New Year’s honours, but under her leadership, HMRC has been criticised by MPs for “unacceptable” customer service and “disappointing progress” on tax evasion. Chancellor George Osborne said Ms Homer had put foundations in place to make HMRC one of the most digitally-advanced tax authorities in the world.

Conservative Peer condemns buy-to-let tax changes – Lord Flight, a former Conservative Shadow Chief Secretary to the Treasury, has criticised the Government’s buy-to-let tax changes. He said plans to prevent landlords offsetting mortgage interest costs against rental profits before calculating tax could destabilise Britain’s housing market by triggering “a sharp fall in prices, if not a crash”.

Small business and enterprise

Half of small businesses struggle with pension rules  – Research by the FSB has found that nearly half of SMEs do not completely understand how to implement workplace pension schemes while 76% said auto-enrolment will place “too much” pressure on their businesses.

London tech start-ups raise $2.3bn – A study by London & Partners reveals London’s technology start-ups secured $2.3bn of investment in 2015, two-thirds more than the year before. The capital attracted 62% of the money invested in UK tech companies by venture capital firms, according to the research. San Francisco-based Index Ventures was the most active investor in London tech, ploughing $345.6m into 12 companies in 2015.

UK economy, finance and markets

Carney: Growth remains sustainable – Mark Carney has insisted that Britain is not in the grip of a “debt-fuelled recovery”, stressing the UK’s economic growth remains sustainable.  Household debt levels in the UK are expected to rise until the end of the decade, hitting 163% of GDP from current levels of 146%, according to the OBR. Meanwhile, separate figures show household debt has jumped by more than 40% in the past six months. Average family debt – excluding mortgage borrowing – stands at £13,520, up from £9,520 six months ago. The latest figure is the highest since the summer of 2013, when the average family owed £16,300, according to Aviva.

Savings rates hit new low, says Bank of England – Interest rates for millions of UK savers have sunk to a new low, according to the Bank of England. The average rate on ISAs fell to 0.85% in December, down from 0.99% in November, and on instant access accounts, the interest rate fell to 0.48%, from 0.54% a month earlier. Some individual banks are paying savers as little as 0.01%, the Financial Conduct Authority reported in December.

RBS warns of deflationary crisis – RBS has sent a warning note to clients advising them to sell everything except high quality bonds, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel. Andrew Roberts, the bank’s credit chief, expects Wall Street and European stocks to fall by 10% to 20%, with even an deeper slide for the FTSE 100 given its exposure to energy and commodities companies. RBS said markets are indicating stresses similar to those seen in the run-up to the 2008 crisis. The bank cited policy chaos in China, among other pressures, as did UBS last week, while some argue without positive data out of China soon, the sell-off could become self-fulfilling and quickly metamorphose into the next global crisis.

Other

Golden years – The death of David Bowie is widely reported. Some writers point out that the cultural icon was not only an innovator in his musical field but he was no slouch in business. In the 1990s he devised a scheme to maximise revenues from his back-catalogue. His “Bowie bonds” awarded investors a share in his future royalties for 10 years, and gave a fixed annual return of 7.9%. Some papers estimate the musician’s wealth at £140m.

Record number of festive returns filed – A record number of workers filed their tax returns on New Year’s Eve and Christmas Day, according to HMRC. In total, 24,546 submitted their returns over the festive period. More than 11,400 filled in online forms on New Year’s Day, while 2,044 submitted tax returns on Christmas Day and 5,402 filed on Boxing Day.

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