Hammer blow to shares

BEWARE of chancellors fiddling with the taxation of dividend income and the undesired effect stealth changes can have. The most egregious change was made by Gordon Brown and Ed Balls in 1997 when they removed the tax relief granted on dividends paid into workplace pensions.

The new measure raised £6bn for the Exchequer but the impact has been estimated at £100bn or more and was the first step in the destruction of final salary pensions as we know them.

Now Philip Hammond has fallen into the same trap.

He is quite rightly concerned by the tendency of some sections of the workforce – agency nurses are an example – to turn themselves into company directors and take advantage of the fact that the first £5,000 of dividend income is tax sheltered.

But as with the announced rise in National Insurance contributions for self-employed, with which the dividend change was linked, this looks like an unnecessary assault on entrepreneurship and the gig economy.

The lowering of the tax-free dividend allowance to £2,000 is a major tax-raising item adding £2.6bn to the coffers of the Government over five years.

It is also an additional levy on stock mar- ket saving in addition to the stamp duty, a long-standing burden on small investors.

Hammond disingenuously sought to link the change to the rise in ISA allowances to £20,000 a year previously announced by George Osborne. This largely is a red herring since five times as many ISAs are held in cash as in shares.

The cut also disproportionately hurts those who have carefully husbanded shares for retirement income, with the over-60s by far the hardest hit.

The most significant long-term impact will be the reduction in the incentive to invest on the stock market.

‘Spreadsheet Phil’ has delivered a heavy blow to the shareholder democracy which was an underpinning of Thatcherism.

ARM harm

WHEN deal-hungry Softbank founder Masayoshi Son spent £23.4bn buying Britain’s high-tech champion ARM Holdings just six months ago, much was made of his intention to be a long-term owner.

There were assurances about jobs in Britain and how Softbank intended to use ARM to bring the ‘Internet of Things’ to its portfolio of tech companies.

As Donald Trump held court in New York during the transition to power, Masayoshi Son was among the first callers and it was speedily announced that the Japanese entrepreneur would be creating an £81bn fund to invest in high-tech opportunities.

Softbank has seen that as an opening to offload a 25pc stake in ARM to a Saudibacked investment fund for £6.6bn. It was apparently encouraged by the desire of Mubadala, the less-than-transparent Abu Dhabi fund, to own a chunk of ARM.

The transaction may look harmless given that Masayoshi’s Vision Fund is just another, broader investor group.

But promises were made that Softbank would be laser-focused on Cambridge and build ARM into one of the world’s great digital groups.

Instead of being treated like a trade investment, shares in ARM are being passed around to Middle East buyers like a carpet in the souk. This is a shabby way to treat a company which is a direct result of scientific excellence at Cambridge where the British taxpayer has a huge investment.

The UK Government says the deal is fine. It presumably doesn’t want to upset sensitive relations in the Middle East.

If part of the company can be disposed of so easily it suggests that the whole of ARM could be sold and the solemn pledges made at the time of the deal erased.

The City referee, The Takeover Panel, has taken on the role of standing as a bulwark against companies abandoning commitments, and should take a urgent look at Softbank’s actions to see if they could have an impact on jobs, patents and future investment in Cambridge.

Post-Brexit Britain just cannot afford to lose those industries in which it has a competitive advantage.

Foul play

SHED a tear for Premier League footballers, including much of the Liverpool team, who lend their images to advertisers.

Among the Chancellor’s crackdowns on tax avoidance is new guidance for employers such as football clubs who pay players for image rights under separate contracts.

New legislation may be needed but the referee is flashing a yellow card.