The Denton Briefing December 2016

2016 has been quite a year. The UK is set to leave the European Union just as soon as the government (and the Supreme Court) can work out how. Our Prime Minister is no longer called David and our Foreign Secretary is called Boris. And, of course, there will soon be a Donald, in the White House. Meanwhile Leicester City won the Premiership, was voted best team of the year, with their manager being voted as the best manager of the year. Great Britain finished second in the Olympic games, Andy Murray is the world’s number one tennis player and last Sunday won for the third time, Sports Personality of The Year and Ireland has defeated the All Blacks. Bob Dylan is the Nobel Laureate for Literature and scientists have discovered that the moon really is made of cheese. OK that last one I may have made up, but you get the picture.

2017 will be all about managing the fall out from such a tumultuous 12 months. And as many of the stories below demonstrate, there is much to manage. At least the answer to the fall in UK household wealth and the slowdown in the property market is simple – buy a house in France.

And it is refreshing to see that the British spirit of enterprise is still alive and well. Hats off to Beardy Man Jay, who tweeted in response to the news that the new five-pound note contains small amounts of tallow: “To all #vegans not liking the new £5 notes I’m offering an #exchange. I will give u £1 for every new £5 u don’t want #tallow.”

I will take this opportunity to wish you all a very Merry Christmas and a happy and prosperous New Year.

Trump Treasury plans biggest tax changes since Reagan
Donald Trump’s new economic team vowed to push ahead with his far-reaching policy proposals to slash taxes, loosen bank regulation and shake up US links with China and other trading partners, writes Barney Jopson in the Financial Times. The president-elect nominated former Goldman Sachs banker Steven Mnuchin as Treasury Secretary and confirmed the private equity mogul Wilbur Ross as his choice for Commerce Secretary. Mnuchin said on CNBC that the Trump administration would create “huge economic growth” by pushing ahead with its plan to reduce the US federal corporate tax rate from 35% to 15%. He said Americans should expect the “largest tax change since [Ronald] Reagan”. Senator Sherrod Brown, a senior Democrat, said: “This isn’t draining the swamp — it’s stocking it with alligators.”

Brexit knocks $1.5 trillion off British households’ wealth
Brits have seen a $1.5 trillion drop in their household wealth – which includes property and investments – as a direct consequence of the Brexit vote, writes Chloe Chaplain in the Evening Standard. The hit came after sterling fell in value against the dollar following the vote to leave the European Union in June, according to the Credit Suisse Global Wealth Report 2016, which referred to the UK as the “main loser” of the year. “The UK had a tumultuous end to 2015 – 2016, with sharp declines in the exchange rate and the stock market following the vote to leave the EU in the June 23 referendum,” it said. A fall in values at the top-end of the property market also contributed to about 400,000 Britons losing their status as dollar millionaires and one of the biggest drops in wealth among the major economies.

Ownership of over 40,000 London properties shrouded in secrecy

Thousands of London’s properties are held by overseas companies registered in so-called secrecy havens, obscuring the details of their true ownership, writes Hayley Kirton for City A.M. A report by Transparency International UK and Thomson Reuters identified 44,022 land titles owned by 23,653 overseas companies in Land Registry data. Of these, 91% of companies, holding 40,098 of the land titles between them, were registered in “tax havens”, such as the British Virgin Islands, Jersey or Panama, where information about who owns companies is not publicly available, making it difficult to trace the true ownership of assets. While there are plenty of legitimate reasons for setting up companies in one of these countries, the report noted that such establishments are also sometimes used by less scrupulous individuals wishing to launder money.

Stamp Duty reform cut tax receipts
An overhaul of stamp duty tax has earned the Treasury only half as much as it expected, writes Tom Knowles in The Times. The stamp duty system was replaced in December 2014 by a progressive threshold that reduced costs for those buying homes priced up to £937,500 but prompted a 10% rise in transaction costs for properties valued at more than £1 million. According to consultancy Oxford Economics, the reform led to 1,950 fewer sales of homes worth more than £1 million last year than would have been expected, and has made the Treasury £370 million less than the £700 million it predicted. The report said that raising stamp duty by 1% on homes worth between £1 million and £2 million had led to an 8% decline in transactions. Experts also said it had cost the economy nearly £1 billion because of a reduction in the number of people selling homes and a subsequent reduction in demand for related services.

Top 1.5% of earners will pay half of extra tax revenue by 2021
Official projections revealed in the Autumn Statement forecast that 469,000 people earning more than the top income tax band of £150,000 will contribute nearly £20 billion to the public purse by 2021, writes Matt Dathan for Mailonline. The Office for Budget Responsibility’s projections for the next five years says that the number of people having to pay the top rate has already increased from 0.75% in 2010 to 1.1% today and will increase further to 1.5% by 2021. Conservative MPs on the Treasury select committee urged Chancellor Philip Hammond to make major changes so the burden of tax is spread more widely. They warned it was dangerous to depend on so few earners to pay such a large proportion of income tax revenue. Tory MP Jacob Rees Mogg said: “If you have very high tax rates then people inevitably take steps to limit the amount of tax they pay.”

Gold hidden from French taxman will benefit French taxman
A Frenchman who inherited a house in Normandy from a relative has discovered gold worth €3.5 million hidden throughout the property, writes Adam Sage in The Times. The new owner moved a piece of furniture and discovered a tin screwed on to the bottom of it. Inside were some gold coins. He began to search all over the house and came across stash after stash. “There were 5,000 gold pieces, two bars of 12 kilos and 37 ingots of 1 kilo,” said auctioneer Nicolas Fierfort who went to the house to value its contents. The greed of the French tax office may explain why the unidentified relative chose to hide the 100 kilos of gold that was purchased in the 1950s and 1960s. But ironically, the celebrations are being shared by French tax officials, who will claim 45% the sum in inheritance tax and also hit the finder with an annual wealth tax bill of about €35,000.

New fivers unsuitable for vegetarians
Vegans and vegetarians are unhappy that the UK’s new five-pound note contains small amounts of tallow, derived from animal fat, writes Julia Kollewe in The Guardian. A petition calling for the use of tallow in the banknotes to be stopped has attracted more than 70,000 supporters so far and will be delivered to the Bank of England. The issue came to light when the Bank responded to a question on Twitter, confirming that the polymer pellets contained traces of tallow. It caused a storm of protest on behalf of vegans, vegetarians and some religious groups. Tallow is also used to make household items such as candles and soap. The Bank of England declined to comment on the petition.

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