October News Round Up
11th October 2018
Taking pot stock - is cannabis an investment opportunity?
You may have heard about the enormous gains marijuana stocks have generated over the past couple of years. You might also be aware of predictions about how large the marijuana industry could become, including a recent projection that the U.S. marijuana market could more than triple, reaching $22 billion by 2022. Many companies in the cannabis industry have opted to go public, making their shares available for purchase on public stock markets, to raise cash to fuel additional growth. But there remain two fundamental arguments against investing in marijuana stocks. One is the risk that the projected growth won't materialize – it remains illegal! Another is that marijuana companies' growth potential may already be reflected in their stocks' high valuations.
Cashless Britain - who benefits?
The claim that Britain is turning into a cashless society has always seemed a bit overblown. As in most rich countries, the amount of cash floating around has in fact grown in recent years. At more than £80bn ($104bn), the value of notes and coins in circulation is in real terms one-third higher than in 2007, when Britain got its first contactless payment cards. Yet lately something has changed. The value of currency in circulation has dropped, year on year, for seven consecutive months, for the first time since records began in the 1960s. If you add to this the 3,000 bank branch closures across the UK since 2015 and ATMs disappearing at a rate of 500 a month in the first half of this year there’s clear evidence that things have fundamentally changed. The official line from banks and regulators is that customers are driving the digitalisation of money. But there’s another, more sinister explanation. Our spending habits are monopolised by two US monoliths, Visa and Mastercard. It is forecast that between them they will control 90% of the total UK electronic payments sector by 2026. Both companies receive a cut from every card transaction. Interesting.
Prepare for the worst
The current odds are about even for a Corbyn-and-McDonnell-led Labour party to win the highest number of seats in the next election (whenever that is). There are mooted plans to:
- extend Stamp Duty Reserve Tax
- increase corporation tax from 20%
- abolish higher rate tax relief on pension contributions
- reduce the annual amount that is investable into a pension (and eligible for relief)
- reduce ISA allowances
- increase capital gains tax
With so much uncertainty as to what the next three months looks like – let alone next year – there are a few potential defensive moves to think about should any of the above happen.
If you are a higher rate tax payer and have any spare cash, it may not be a terrible idea to divert it towards a pension now. Similarly, it makes sense to maximise ISA contributions while limits remain generous. Anyone sitting on sizeable capital gains may want to talk to their adviser about crystallising some profits while the tax rates are so favourable. It’s also imperative (in any environment) to ensure that any family savings and investments are set up tax efficiently.
Taxman goes after parents
Thousands of parents in receipt of benefits designed to support working families have been slapped with a bill for "over-claiming" – in some cases dating as far back as 2013. Repaying the child benefit requires the parents affected to submit a self-assessment tax return. However, thousands of parents have failed to do so and are now being contacted by HMRC. HMRC has revealed it's issued 36,000 letters to families while 5,000 more are set to be sent shortly. A further 60,000 bills are also being sent to parents who could owe money for the 2017/18 tax year. The problem began with a change in child benefit rules in 2013, which saw anyone earning more than £50,000 having to pay some of it back. This charge increases by 1% for every £100 earned over £50,000 and once you earn £60,000 you have to hand the whole amount back.
The window shuts on the Retirement to Correct (RTC)
By now HMRC may have received your company and trust information from more than 40 territories in line with the Common Reporting Standards. The information will include details of things like overseas bank accounts, insurance products and other investments including offshore companies and trusts. The information will include your name, address, date of birth, and balance on the account/payments into the account. There was a small window to correct your tax history before the 'failure to correct' date came into force on 1st October. HMRC obviously thinks that this information will be a 'game changer' and in anticipation of receiving this windfall of information they and the government have been busy legislating in anticipation to increase its powers to take action. But, the fact remains that it is not in the national interest of the late adopter nations to comply with an incoming request for information in a timely manner, mostly because it is expensive, time-consuming and resource intensive to comply with a request to provide evidence. As such HMRC still has some way to go to streamline its more aggressive approach.