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What's happening in the world of accountancy today

News in brief

Author: ICAEW Insights

Published: 18 May 2022

23 May 2022: record £300m funding package to cut youth crime; UK targets Russian airlines with new sanctions; benefit counter-fraud plan to save taxpayer £2bn.

The government is making its biggest investment in a generation to tackle youth offending and cut crime. The funding package worth £300m over the next three years will be made available to English and Welsh councils. As part of this, ‘Turnaround’, a new early intervention scheme will help local Youth Offending Teams catch and prevent youth offending earlier. It will focus on those displaying signs such as poor school attendance, troubles at home and substance abuse, and connect them to targeted support. The funding will also bolster day-to-day running of youth justice schemes and initiatives. The estimated cost of late offender intervention to the economy is nearly £17bn per year.

The UK Government is introducing new sanctions against the Russian airline sector. State-owned Aeroflot, Russia’s largest airline, Ural Airlines and Rossiya Airlines will now be unable to sell their unused, lucrative landing slots at UK airports – preventing Russia from cashing in on an estimated £50m. Russia has previously been from the UK’s airspace and waters and from exporting aviation goods and technology. 

A £600m ‘Fighting Fraud in the Welfare System’ plan has been announced. Under it, 2,000 trained specialists will review over two million Universal Credit claims over the next five years, as part of bolstered ambitions to ensure money is well spent and give taxpayers confidence that funds are reaching those who need it. Measures also include new powers aligning the Department for Work and Pensions with HMRC by allowing staff to arrest and carry out search and seizure. They will also have boosted access to bank data on a larger scale and a new civil penalty will prevent fraud going unpunished. 

20 May 2022: M&S warns online sales tax will damage High Street; FCA to ensure banks provide cash access across UK; Big Four increase India recruitment.

Marks & Spencer has written to the Chancellor warning that an online sales tax would damage the High Street. A three-month government consultation on an online sales tax closes on Friday. The Treasury said the proceeds would go towards funding a reduction in business rates for shops, the BBC reported. But M&S says a new online tax would "punish" retailers and leave them less money to invest in High Street stores. The additional tax burden would make it harder for them to invest in what is needed to survive and grow in the digital era, it added. 

The Financial Conduct Authority will get powers to ensure UK communities have access to cash and fine banks that fail to comply. Under the government’s pending Financial Services Bill, it will ensure the UK’s largest banking and building societies give consumers access to withdrawal and deposit facilities – such as ATMs, Post Offices or mobile banking hubs – within a “reasonable” distance from their community. About 5,000 bank and building society branches have disappeared from UK High Streets since 2015, leaving the elderly and vulnerable at risk. About 5.4 million adults use and rely on cash on a daily basis, the Guardian reported.

The Big Four accounting firms seem to have been focusing on India for recruitment since the start of 2022, GlobalData research shows. There is a focus on roles related to sustainability and productivity-enhancing technologies. Among the former, ESG continues to gain traction across the Big Four, which are likely to enhance focus across the Asia-Pacific region, GlobalData predicted. Among the latter, big data and cloud engineering roles are the most sought after. EY had the highest job postings for India during the first quarter, followed by Deloitte, PwC, and KPMG respectively, City A.M reported

19 May 2022: UK economy loses £47bn to cross-border tax complexity; California court rules to remove women on boards law; economists warn cutting City regulation risks financial crash. 

Cross-border tax complexity cost the UK economy £47.6bn in lost revenue last year, an average revenue loss of 16% on total EU exports. Post-pandemic, 72% of surveyed UK businesses planned to expand to at least one more EU market, the Centre for Economics and Business Research (CEBR) found. However, 62% now say the fear of being fined for tax compliance has recently caused them to reverse plans, with 32% planning to exit at least one market. With little set to change, CEBR predicts the investment loss due to cross-border tax complexity will see a further £16.1bn of value lost to the UK by 2026, City A.M reported. 

A Californian court has ruled that state law requiring companies to have up to three women on corporate boards is unconstitutional. Under the law, some companies faced fines of up to $300,000 (£240,000) for failures to meet the required representation. Half of the required corporations have still failed to do so, the BBC reported. Conservative legal group Judicial Watch claimed it was illegal to use taxpayer funds to enforce a law that violated the right to equal protection by enforcing gender-based quotas. The Superior Court Judge ruled the 2018 law violated the right to equal treatment under state and federal law. Secretary of State Shirley Weber has said she will challenge the ruling.

Scaling back City regulation will put the UK at risk of another financial crash, experts have warned. In an open letter to Chancellor Rishi Sunak, 58 leading economists and politicians responded to his plans to “cut red tape” through a financial services and markets bill. “We wholeheartedly support the government’s aim to stimulate long-term UK economic growth, including through financial regulation. Yet we believe that competitiveness is an inappropriate objective for regulators.” They warned that competitiveness objectives could be a “recipe for excessive risk-taking”, potentially creating the same conditions behind the 2008 banking crash, the Guardian reported

18 May 2022: job vacancies outpace unemployment for first time; poorest households struggling to get £150 energy rebate; EU plans loans and grants to help rebuild Ukraine. 

There are more job vacancies than unemployed people in the UK for the first time since records began. The Office for National Statistics found the unemployment rate fell to 3.7% between January and March, its lowest for almost 50 years, as job openings rose to a new high of 1.3 million. However, wages (excluding bonuses) rose by 4.2% in the same period but failed to keep up with the rising cost of living – which hit 7% in March and is expected to increase further. When adjusted for the impact of rising prices, this meant pay dropped by 1.2% – the biggest fall since 2013.

The poorest households in England and Wales are struggling to access council tax rebates to help offset their soaring energy bills. Charity National Energy Action warned those who did not pay council tax by direct debit were affected, with many facing long waits for the £150 payouts. Councils have been instructed to administer these from April but are struggling at such short notice. All must be paid by September. Direct debit payments are easier to process and many councils are doing them first. However, typically the poorest households do not pay council tax by direct debit – as they either do not have a bank account or manage their finances on an ad hoc basis. This means the poorest will be the last to receive help after the energy price cap went up by £693 for the average household in April, the BBC reported.

Ukraine could receive loans, grants and possibly the proceeds of seized Russian oligarch property to help fund its rebuilding. A leaked EU reconstruction plan said non-repayable grants from EU member states would help it afford the multibillion-euro cost. In the plan, the European Commission proposed assessing the feasibility of using assets seized from sanctioned Russians and Belarusians. It highlighted the importance “not only to freeze assets, but also to make possible to confiscate” them. The report also revealed that Brussels officials have called for the EU to borrow as a bloc on international capital markets to finance loans for Kyiv, the Guardian reported

17 May 2022: prescription charge freeze to ease cost of living; J5 summit plans global action on tax crime; UK sanctions Putin's personal finance network.

The cost of NHS prescriptions will be frozen for the first time in 12 years, rather than increasing in line with inflation. The freeze will help ease cost of living pressures on households and ensure prescription medication remains accessible. Costs will remain at £9.35 for a single charge, saving £17m overall. The NHS Low Income Scheme also offers help with payments and offers some free prescriptions for eligible people. Additionally, a record £39bn will be invested via the Health and Care Levy, to help tackle the COVID-19 backlog and reduce waiting times. 

The latest Joint Chiefs of Global Tax Enforcement (J5) summit saw leaders plan new international action against tax fraud. Representatives from the UK, Australia, Canada, Netherlands and the US shared intelligence and coordinated efforts against international tax crime and money laundering. They discussed emerging threats and agreed new operational priorities and targets. The HMRC-hosted event also included the inaugural Global Financial Institution Summit. This kickstarted talks between the J5 and some of the world’s biggest banks. Leaders from both sectors examined key threats to the international tax system and discussed what more can be done to tackle tax crime together.

New sanctions will hit Vladimir Putin’s financial network, tightening the vice on Russia’s President and his inner circle. While his official listed assets are modest, Putin’s lavish lifestyle is funded by a cabal of family, childhood friends and selected elites. In return, they are given positions of influence over the affairs of the Russian state far exceeding their formal roles. The UK has now sanctioned 12 individuals within this circle, meaning more than 1,000 individuals and 100 entities, including oligarchs worth £117bn, have been sanctioned.

16 May 2022: KPMG fined record £14m for forging documents over Carillion audit; teacher bonuses and funding for schools announced; £26m UK-Wales deal made for Freeport. 

KPMG has been fined a record £14.4m after former staff forged audit documents. The Big Four firm provided misleading information to the Financial Reporting Council (FRC) as part of audit quality reviews, meant to confirm the integrity of audits conducted for now-collapsed outsourcer Carillion and software firm Regenesis between 2014 and 2016. A tribunal last week upheld the FRC’s allegations that KPMG and former staff created false meeting minutes and retroactively edited spreadsheets. KPMG’s total fine would have been £20m – the largest on record – but was reduced to reflect its cooperation and willingness to admit guilt, the Guardian reported

Teachers working in the 30% most disadvantaged UK schools are to receive £3,000 in tax-free payments per year over next three years, if their school is in an Education Investment Area. The boost for science, technology, engineering, and mathematics teachers comes as part of a £60m investment to attract and retain the top teaching talent. Additionally, new funding will be provided to improve more than 1,400 school buildings. Maths, physics, chemistry and computing teachers in their first five years of teaching will be able to claim up to £9,000 over three years in tax-free bonuses from September, if they work in disadvantaged schools. 

The UK and Wales have reached a £26m deal to establish a new Freeport in Wales. Bidders must show how they will create employment opportunities with good salaries and conditions and meet both countries’ net zero goals. Officials from UK and Welsh governments will jointly assess the bids. The deal further supports the UK’s Levelling Up White Paper ambitions. Also under this, Wales has received £121m through the Levelling Up Fund, £46m through the Community Renewal Fund and £464,258 from the Community Ownership Fund.

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