Weekend press review – taxing times

by | Apr 16, 2018

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The Financial Times reports that HMRC has been so tied up with preparing for Brexit that it has fallen behind with its plans to modernise the UK tax system. Last week, the FT says, it declared that it could not confirm which of its current 267 measures will be abandoned or postponed because of ongoing discussions with the Treasury.

The bulk of the delay, it seems, has been caused by the need to create a new Customs Declaration Service, which the FT says is to be capable of dealing with a vastly increased volume of customs declarations after we leave the Single European Market. HMRC Chief Executive John Thompson says that Brexit has increased his department’s workload by 15%. And, the FT says, the impact is most likely to been seen in ‘slippage’ to the HMRC’s digital tax project, which is due to go into effect next April for companies with turnover above the £85,000 value added tax threshold. Just two days after the UK is set to leave the EU!

Although the EU computer project is currently on time, Mr Thompson has conceded that there is “no guarantee” that it can be completed on schedule. And that HMRC has “proposed a number of projects which should stop, or not start and a number which should be stretched out over a longer timescale.”

 
 

The Mail gets stuck into the new tax year with a feature on nine financial products that are probably fit for a clear-out from readers’ accounts.

Top of the Mail’s list are packaged bank accounts that charge a monthly free for giveaway facilities that the account holder may be buying separately – travel insurance, free car breakdown services, even home emergency cover. Second is any old deposit account that’s still paying derisory rates of interest. And third are store cards that are probably charging far too much monthly interest – 29.9% is by no means uncommon.

Extended warranties, unwanted mobile phone cover, payment protection insurance – the list goes on in fairly predictable fashion. But the Mail’s observations on household energy tariffs and paid-for credit reference services may surprise you. Well worth a read, if only to serve as a checklist.

 
 

The Guardian is running a feature on the return of the payday lenders which are making their way back after being slapped down by the FCA a couple of years ago. The worst excesses of Wonga may be in the past, it says, but a cluster of new companies with friendly names like Trusted Quid, Piggybank, Mr Lender and Lending Stream are back in the business with APRs at up to 1,400%, and sometimes more. That’s still in keeping with the FCA’s 2015 limit of 0.8% per day, but you’ll need to read the article to follow the maths.

The Guardian also reports that the FCA is now turning its attention to companies like Brighthouse, which sells goods on expensive hire purchase terms to low-income households, as well as doorstep lenders such as Provident Financial, which cost Neil Woodford so dearly last autumn (but which is now in the re-ascendant). The article concludes with a list of four “social lenders” which ought to be able to undercut any of these, but at APRs of 120% to 200%.

The Financial Mail on Sunday has in its fund focus column, the Witan Investment Trust. Witan has undergone considerable change over the past few years as it has moved to operating on a multi-manager approach. Manager Andrew Bell is described by Jeff Prestridge as an “atypical overseer of a multi-billion pound investment trust, who is more of a conductor, ensuring the orchestra of specialist fund managers he has personally selected come together to deliver a satisfactory investment outcome.”  Poetic indeed!

 
 

Since the start of last year, Prestridge reports that Bell, assisted by an actively involved board, has appointed GQG Partners to run money in emerging markets. He has also brought in Crux – run by Richard Pease – and SW Mitchell to manage European portfolios.

Out have gone MFS Investment Management and Tweedy, Browne and Company as Bell has consolidated his underlying global managers from five to three. The result of all this hiring and firing is that Witan’s £2 billion of assets are now spread across ten investment houses and some 350 equities. As well as GQG and Crux, key managers include Artemis, Lansdowne Partners, Lindsell Train and Veritas. In addition, a small slice of the portfolio (nine per cent) is managed directly by Bell and primarily invested in private equity funds – the likes of Apax Global Alpha, Electra and Princess Private Equity.

In the article, Bell is quoted as saying: ‘What we are trying to do at Witan is create a team of eclectic managers who are renowned for their stock picking. We do not always get it right straightaway but we are constantly striving for the Holy Grail. What we want are managers who are not old and fossilised in their investment styles – who are adaptable to the changing world where a technology revolution is taking place.’  Sounds good to us!

Why it’s harder than ever to be a DIY investor. Although this isn’t the kind of headline that we are guessing will cause too much concern directly with financial advice professionals, it is interesting to note some of the areas where The Sunday Telegraph Money section has identified potential problems for DIY investors. Mostly, it relates to direct investment in stocks and bonds rather than collective funds. DIY investors, The Telegraph says, are also being impeded by the simplification of some investment services, which has resulted in the loss of tools and information on which they used to rely.

When it comes to investment classes, those mentioned are:

  • Regulator cutting off access to bonds – relating to an an EU law from 2003 – the Prospectus Directive – which compelled bond issuers to provide significant amounts of information unless “high minimum denominations” of €100,000 (£86,000) or more were involved. Also that in 2015 the FCA issued new restrictions on “regulatory capital instruments” being sold to retail investors. This term covers a variety of bond types issued by regulated entities such as banks and building societies.
  • Simplified investment shops – including robo-advice. The article says that the FCA has been actively encouraging the growth of such services to try to make advice more widely available, and has freed them from some of the regulatory burden faced by traditional advisers.
  • Funds being withdrawn – due to PRIIPS, hundreds of ETFs and investment trusts were withdrawn from major fund shops when they came into force this year.
  • Information blackout – Part of Mifid II relates to how investment research is paid for and a knock-on effect has been that it has become more difficult for retail investors to access some kinds of information, such as stockbrokers’ analysis and forecasts. Investment data firm Morningstar recently removed brokers’ consensus forecasts – predictions of a company’s profits – from its website.
  • Adviser-only funds A reminder that some funds are available only through financial advisers such as a recently launched range of risk-targeted funds from Schroders and Prudential’s £80bn with-profits fund.

Meanwhile, the Sunday Times Money section leads with the rising cost of private medical insurance and how geography plays such a difference in the premiums – with London being the most expensive. As you’d expect, the advice is to shop around to get the best deal – and that savings are available.

Also on the agenda for Sunday Times Money is estate planning – in particular, the use of investment in AIM shares to mitigate IHT, something which is hardly news to advisers. Also unlikely to be news to IFA Magazine’s professional readers, they highlight other means of reducing IHT liability such as using a pension, making regular gifts and making regular gifts out of income.

In his personal account column, Ian Cowie comments on heightened concerns last week over the impact of an imminent trade war between America and China, and a report from BNP Paribas that it could cut global share prices in half. It did cause some turbulence in share prices, one that Cowie capitalised upon by topping up his holding in Boeing, but fears eased the next day as Trump threat to increase taxes on $150bn worth of imports received an emollient response from the Chinese President. There are still risks Cowie warns, but he also comments that “ when we arrive at a market where everyone is cheerful, that will be the time to sell.” Wise words.

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