Personal Finance Society news update from 7th to 20th June
Taxation and Trusts
TAXATION AND TRUSTS
Post-election thoughts for financial
(AF1, AF2, AF3, FA2, JO3, JO5, RO3, RO4,
The current uncertainty over future taxation policy reminds us
of the importance of informed, balanced financial advice.
Regardless of the complexion of the next Government:
- Taxation (broadly at the levels we are currently experiencing -
or higher) will remain high on the political and economic
- Clients will continue to be interested in legitimately reducing
- Aggressive tax avoidance will continue to be attacked.
- It will remain possible to save and invest tax effectively in
ways that are permitted by the legislation. No party is suggesting
that there is any fundamental objection to this basic
- Choices will exist and they are likely to continue to be
- Advice will remain essential and the "alpha" that can be
secured from well-informed advice will continue to be valued and in
No summer budget?
(AF1, AF2, AF3, FA2, JO3, JO5, RO3, RO4,
A report in the Financial Times for 14 June stated that the
Chancellor and his replacement Treasury Chief Secretary (Liz Truss)
are not planning a Summer Budget and, instead, are working on "a
new strategy" to be revealed in the Autumn Budget (assuming the
government lasts that long).
If the report is correct, it raises another question mark over
the raft of Finance (No. 2) Bill 2017 measures which failed to
reach the Finance Act 2017. The explanatory Budget timetable
note issued by the Treasury last November stated:
'From winter 2017, Finance Bills will be introduced following
the Budget. The aim will be to reach Royal Assent in the spring,
before the start of the following tax year.'
In theory that could still mean the culled legislation remerges
in, say, a March 2018 Finance Act, with some measures (eg Money
Purchase Annual Allowance cut) to take effect from their originally
planned 6 April 2017 start date. In practice, such timing starts to
feel like backdated legislation.
We may gain more of an idea of when the Finance Bill measures
are to be revived from the Queen's Speech.
The let property campaign: guide to making a
The Let Property Campaign is to enable landlords who owe tax
through letting out residential property, in the UK or abroad, to
get up to date with their tax affairs in a simple and
- those that have multiple properties
- landlords with single rentals
- specialist landlords with student or workforce rentals
- holiday lettings
- renting out a room in a main home for more than the Rent a Room
- those who live abroad, or intend to live abroad for more than 6
months, and rent out a property in the UK as they may still be
liable to UK taxes
Those who are unsure whether they need to disclose unpaid taxes
under this campaign can use the
Let Property questionnaire to help them decide.
Full details of the campaign and how to make a disclosure can be
This is an ideal opportunity for advisers to contact clients to
ensure their tax affairs are up-to-date and an early disclosure
will result in lower penalties and interest being payable. Clients
should also be made aware that if HMRC accepts a disclosure they do
not necessarily have to make an upfront payment as HMRC accepts
various payment methods which will enable individuals to spread
Collective funds - April 2017 IA statistics
(AF4, FA7, LP2, RO2)
The Investment Association (IA) statistics for April show a
second successive month of record net retail sales at £4.9bn,
helped by the traditional end/start of tax year pick up in ISA
sales, combined with the higher ISA contribution limit.
The Investment Association has just published its monthly
statistics for April 2017. Like the previous two months'
numbers, the April net sales show a pick-up of interest among
retail investors after a disappointing 2016. Net retail sales have
now been positive for the past nine months, following the
Brexit-inspired outflows of May to July 2016. This month's
- Net retail sales for the month were £4,934m, up £903m on (a
revised) March and a second new record inflow.Grossretail sales
were down £3,066m on March's (revised) figure, at £19,398m, a
reminder that net sales numbers can be more influenced by the level
of redemptions than fresh inflows. In April redemptions also fell
21.5% - from £18,433m to £14,464m, probably a reflection of
year-end CGT planning having a big impact on March's number.
- Net institutional sales for April fell from £3,568m to £2,505m.
A year ago, there was an inflow of just £73m.
- The net inflows more than countered a small fall in overall
market values, lifting total funds under management (FUM) to
£1,092.3bn, the fifth consecutive month a new record has been set.
Across the year, the FUM increase amounted to 17.4%, mainly due to
- Equity was the best-selling asset class, with net retail sales
of £2,025m, the second highest level ever recorded (again). Mixed
Asset came in second, with net sales of £1,032m. Money Market
completed the top three with net retail sales of £832m. Property
remained the least popular asset class, but still drew in a net
- The most popular sector in terms of monthly net retail sales
(£678.2m) was the rag bag that is Specialist. If that seems
strange, then all you need do is remember that the CF Woodford
Focus Income, which launched in April, falls into the Specialist
Targeted Absolute Return took second place (£606.9m), Global was
third, £ Strategic Bond was fourth and Short Term Money Market
- ISA net flows were £1,067m, the second month of net inflows.
This was £654m up on March's figure and helped boost the overall
net retail inflow number. A year ago, April produced £586m net
inflow to ISAs
- The total value of tracker funds rose 1.1% to £150.5bn, meaning
that they now account for 13.8% of the industry total. The
corresponding figure for April 2016 was 11.3%. Tracker fund
net retail sales amounted to £933m - 18.9% of all net retail
It is worth pausing to remember that, as these figures relate to
April, they not only cover the tax year end, but also the period
before and shortly after the snap election announcement on the
18th of that month. More recent figures from EPFR Global
suggest that the last six weeks have seen steady outflows from UK
equity funds as the outcome of the election has become less clear
cut. There may be the first hint of that in the popularity of Money
Market funds in the IA April statistics.
May inflation numbers
(AF4, FA7, LP2, RO2)
CPI for May showed prices rising by 0.4% over the month,
whereas prices rose by 0.2% between April 2016 and May 2016. The
consensus had been for a 2.7% annual rate. The CPI/RPI gap remained
at 0.8%, with the RPI annual rate now standing at 3.7%. The next
earnings growth figures are likely to show little change from
March's 2.1% (excluding bonuses), underlining a growing squeeze on
The Office for National Statistics (ONS) newly-favoured CPIH
index was up 0.1% to 2.7% for the year. The ONS put the rise down
to a variety of factors, with one main driver (and five much less
significant ones) in the upward direction:
Recreation and culture:This sector saw prices rise by 0.9%
between April and May 2017 compared with a fall of 0.4% a year ago.
The major contribution came from games, toys and hobbies,
particularly computer games. Price movements for these games are
dependent on the composition of bestseller charts and can fluctuate
from month to month. For example, in April recreation and culture
was the maindownwarddriver because of falling games costs. Other
upward pressures came from increased prices for data processing
equipment and package holidays.
Transport:This category was again influenced by the timing of
Easter. Last month the annual figure effectively covered two sets
of Easter price increases; the 2016 Easter jump has now dropped out
of the 12 month figures. Falling fuel prices also helped as petrol
and diesel prices each fell this year, by 1.0p and 1.6p per litre
respectively. A year ago, their prices rose by 2.8p and 3.0p
respectively. Fuel prices have now fallen for three consecutive
months and with Brent Crude again below $50 a barrel, more
assistance may be on the way (albeit somewhat countered by the
latest politically inspired hit to sterling).
Core CPI inflation (CPI excluding energy, food, alcohol and
tobacco) was up 0.2% at an annual 2.6%. All twelve Index components
were in positive annual territory, with the lowest (communication)
now 1.4% and the highest (alcoholic beverages and tobacco) up 4.9%.
Goods inflation rose by 0.5% to 2.9%, while services inflation
declined by 0.2% to 2.8%.
Producer price inflation (PPI) eased back sharply, suggesting
that the worst of the Brexit currency impact may be over for now.
The input PPI figure fell from 17.9% in the year to April 2017 to
11.6% in the year to May 2017. At the start of the year it was
19.9%. Output price (aka factory gate price) inflation was
unchanged for the third month at 3.6%.
June interest rate decision
(AF4, FA7, LP2, RO2)
An increase in interest rates could be nearer than anyone
The 15 June meeting of the Monetary Policy Committee (MPC) of
the Bank of England was expected to be a non-event. A Reuters poll
of economists revealed that not one expected a move in base rates
from the 0.25% set in the wake of the Brexit vote last year. They
were all proved right, but…
Of the eight MPC members, three external members voted for a
rate increase. It was the first time since 2011 that there had been
three votes for a rate rise - and that was when the MPC had nine
members. The 3-5 vote was a shock to the market and gave a brief
boost to sterling.
statement noted that 'CPI inflation has been pushed above the
2% target by the impact of last year's sterling depreciation.
It reached 2.9% in May, above the MPC's expectation.
Inflation could rise above 3% by the autumn, and is likely to
remain above the target for an extended period as sterling's
depreciation continues to feed through into the prices of consumer
goods and services. The 2½% fall in the exchange rate since
the May Inflation Report, if sustained, will add to that imported
inflationary impetus.' That concern about over-target inflation
seems to have been the reason why the trio voted for a 0.25% rate
increase, despite recent evidence that growth is slowing.
One of those voting for the increase, Kristin Forbes, was
attending her last MPC meeting. The election hiatus means that her
replacement has not yet been chosen. Neither has a replacement been
named for Charlotte Hogg, the deputy governor who resigned in the
wake of a grilling from the Treasury Select Committee. In theory,
Mr Hammond could name two new members in time for 3 August's MPC
meeting, changing the voting mix significantly. Even so,
yesterday's general assumption among commentators that rates would
not rise until 2019 is now probably consigned to history.
The US Federal Reserve increased its main short-term rate by
another 0.25% on 14 June, taking it to a 1.00%-1.25% range. The Fed
also set out the first steps to unwinding its bloated $4.2trn
balance sheet, the result of its quantitative easing programme. The
Bank of England still looks a long way behind...
TPR carrying out AE spot checks on
(AF3, FA2, JO5, RO4, RO8)
The Pensions Regulator (TPR) is to begin carrying out spot
checks in Birmingham to ensure employers are complying with their
automatic enrolment duties.
Inspection teams will visit dozens of businesses in and around
the city to check that qualifying staff are being given the
workplace pensions they are entitled to.
The move is part of a nationwide enforcement campaign which
began in London in April to ensure employers are meeting their
automatic enrolment duties correctly.
Birmingham is to become the third area to be the focus of the
short-notice inspections. TPR carried out checks in Greater
Manchester earlier this month.
The checks will also help TPR understand whether employers are
facing any unnecessary challenges that we can help them with, such
as by improving our systems.
But they will also highlight employers who have not taken the
required steps to become or remain compliant, paving the way for
(AF3, FA2, JO5, RO4, RO8)
Following the snap election results and the usual reshuffle, the
new team at the Department for Work and Pensions is now:
- Secretary of State - Rt Hon David Gauke MP
- Minister of State for Employment - Damian Hinds MP
- Minister of State for Disabled People, Health and Work - Penny
- Parliamentary Under Secretary of State for Pensions and
Financial Inclusion (Pensions Minister) - Guy Opperman MP
- Parliamentary Under Secretary of State for Family Support,
Housing and Child Maintenance - Caroline Dinenage MP
- Parliamentary Under Secretary of State (Lords) - Baroness
The pension minister's responsibilities include:
- pensioner benefits, including new State Pension, Winter Fuel
Payments and Pension Credit
- State Pension age review
- financial inclusion and guidance, including the Single
Financial Guidance Body, Credit Unions and Post Office Card
- private and occupational pensions, including regulatory powers,
Automatic Enrolment and the National Employment Savings Trust
- oversight of arms-length bodies, including the Pensions
Regulator, Pension Protection Fund, Financial Assistance Scheme and
HMRC pension scheme newsletter 87
(AF3, FA2, JO5, RO4, RO8)
HMRC has recently published
Newsletter 87 which covers:
- Pension Advice Allowance
- Relief at Source
- Scottish Rate of Income Tax
- Pension Scheme return (SA970)
- Changes to the ROPS listing
Of notable interest:
Pension Advice Allowance
HMRC has received queries from pension scheme administrators
asking if their members can request the pension advice allowance
from their scheme by email. The
Registered Pension Schemes (Authorised Payments) (Amendment)
Regulations 2017 say that the request must be made in writing
by the member. HMRC confirmed that the member can make this request
by email, however it's down to the pension scheme administrator to
decide if they will accept requests by email.
The pension scheme return and the SA970 tax return for trustees
of registered pension schemes
HMRC has received a number of queries from pension scheme
administrators confusing the pension scheme return (PSR) with the
SA970 tax return for trustees of registered pension schemes.
These are 2 different information returns; the pension scheme
return and the SA970 tax return for trustees of registered pension
schemes. As pension scheme administrator/pension scheme trustee,
may have to complete both the PSR and the SA970 tax return for
trustees of registered pension schemes.
Changes to the scheduled publication of the Recognised Overseas
Pension schemes (ROPS) notification list
A reminder that there are planned changes to the scheduled
publication of the ROPS notification list as follows:
- 2 June 2017 - suspension of the ROPS notifications list
- 5 June 2017 - new list to be published
- 15 June 2017 - routine publication of the ROPS