Cummings and Goings

Monday 16th November 2020

Dom and Donald - Gone - well nearly, we have to wait until the end of the year.

Very sorry we couldn't resist the headline and hence another Bailey Cook Blast so quickly after the one last week as we didn't want to be beaten to the headline. Having said this a lot has happened over the last few days.

Vaccine Task Force

From our note earlier in the week you'll remember that one of our thoughts centred on how well Boris deals with the vaccination programme and it's roll out. There has been a lot written and spoken since Monday's announcement and it's difficult to really understand it all, but it looks very promising, particularly that the most at risk will hopefully have a vaccination sooner rather than later and in particular that the vaccine is 90% effective and was not expected.

One of the journalist's questions, at yesterday's briefing, tried the negative approach (surprisingly!) that if we are not part of Europe will we have enough of our share of doses of the vaccination? The answer was that the Government Task Force have invested in six vaccines covering the four the main vaccine methods and have 350 million doses reserved. It was a low key but powerful answer. I also expect, like us, you may not have known that the Task Force have been producing podcasts since August, which we have just discovered and you have to ask why so low key? It was surely a job for the director of communications! If you are interested and want to listen go to:

Vaccine Podcast

Sustainability - Climate News

There has been a recent flurry of positive policy-level-climate-related news. Joe Biden has committed to re-joining The Paris Agreement, Vladimir Putin has ordered his government to cut emissions by 30% and China has set net-zero carbon goals. This week Rishi Sunak also announced the issue of green gilts (a way for the government to raise money) to fund eco projects.

More on this from Phoebe Stone. Please click here.

Gains Tax (CGT) - The Office for Tax Simplification (OTS) Reports

We mentioned this back in September and it's no surprise that the OTS has recommended quite radical changes. You'll have no doubt read about this elsewhere but bear in mind this is the first of their reports covering design and principles so includes tax changes that are headline grabbing. The second will cover technical and administration issues due in the new year. The main aspect of the current report is to highlight features of CGT that distorts behaviour and it's interconnection with both income and inheritance tax. Briefly they have recommended:

• The government should consider aligning CGT rates with income tax or deal with issues where it overlaps with income tax. The good news is that they have recognised if they do align tax rates there should be some form of indexation. Taxing a gain made over many years all in one final year is unfair.#
• They feel the annual exemption of currently £12,300 distorts investment decisions. They found in 2017/18 tax year 50,000 people used close to their annual exemption so they propose to reduce this. If the exemption reduced to £5,000 it's estimated the number of taxpayers required to pay CGT would double, and at £1,000 it would treble.
• The OTS has already reviewed and made recommendations to Inheritance Tax (IHT) and in this report wish to do away with the rebasing of an asset's value on death to the then current value being called "no gains no loss". There should be some form of indexation and have recommended the tax isn't paid at the time of death but on the eventual disposure called "Holdover Relief".
• Entrepreneur's Relief (now Business Asset Disposal Relief) was altered in this year's March budget so wasn't expected to have a proposed change - wrong - they don't think a lower rate of tax on the sale of a business is a reason (or partial reason) to take the risk of setting one up. Alternatively, incentives should be to set up a business not sell it.

So the first report has been published for Government consideration and the second due in the new year with the report on IHT already having been published. The question we don't know the answer to is what action the Government will now take to tax reform in the March 2021 budget.

It leads to the simple thought that if you are considering selling an asset that has a gain, it may be best done this tax year.
(Source: Technical Connection)

Market News

The reaction to the vaccine news was phenomenal and set the market alight. However, stock markets slipped yesterday as the current coronavirus news brought it back to reality. We mentioned the US stimulus talks and these seem to have stalled with little hope of anything before the New Year. The Pfizer news, and indeed the other positive steps for other vaccine candidates, has put a degree of light at the end of the tunnel for coronavirus. What it doesn't do is determine the economic recovery and the impact on, or political palatability of, hospitalisations and ultimately fatalities, that the current wave is bringing.

Central Bank and Government intervention and stimulus are key to continue to see us through the economic falls. It's a bit like building a bridge over the Grand Canyon and it's not finished yet, but so far has been well built and we are getting there.