Tuesday 29 June 2010

PM and goal-line technology firms dispute Fifa claims



By Daniel Emery
Technology reporter, BBC News

The prime minister has backed calls for video and goal-line technology (GLT) to be used in football matches.

David Cameron's call echoes that made by makers of ball-tracking systems, along with a number of managers.

"I'm a keen follower of cricket and tennis and I think the third umpire has been a great thing... that's something football could now have a look at," said Mr Cameron.

Fifa has consistently refused to entertain the idea of using GLT.

Manufacturers of ball-tracking systems say England's disallowed World Cup goal just emphasised an ongoing problem with the sport.

Hawk-Eye and Cairos, which make rival GLT systems, say Fifa needs to rethink its current position.

"We are using technology that is 100% accurate and adds fairness to the game," Christian Holzer of Cairos told BBC News.

"Technology should not enter into the game. It was a clear statement made by the majority of the IFAB (International Football Association Board)," said Fifa general secretary Jerome Valcke in March.

But not everyone agrees. There have been calls from players, managers and coaches for a number of years, prompted by a series of controversial refereeing decisions.

British based Hawk-Eye, which uses a camera detection system, and German firm Cairos, which utilises chip technology inside the ball, both say that new technology would assist referees and make their job easier.

"The decision was unfair to the English team. Had it gone 2-2 at half-time, it would have been a very different match," said Mr Holzer.

The issue of GLT has dogged Fifa for more than a decade.

The rules of football are determined by IFAB, which consists of eight voting members. England, Scotland, Wales and Northern Ireland each have one vote, with "the rest of the world" (ie the Fifa executive) holding the remaining four.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Saturday 26 June 2010

Landlords warned not to disguise property profits



Buy-to-let landlords have been warned not to disguise their profits from the taxman after selling their properties.

Accountancy firm UHY Hacker Young says tax officials are increasingly trawling through Land Registry records to check the accuracy of tax returns.

If a property is not a seller's main residence then capital gains tax (CGT) may be payable on the profit.

Hacker Young said special investigators were raising £10,800 for each special enquiry, up by 79% in two years.

The amount of money raised from each investigation rose despite the fact that the number of special enquires actually fell - down by 31% from 9,900 in 2007-08 to 6,800 in 2009-10.

"This is a massive increase in capital gains tax from enquiry work, particularly as the [total] amount of CGT payable has collapsed as asset values slumped during the recession," said Roy Maugham, tax partner at UHY Hacker Young.

"It shows just how aggressive HM Revenue & Customs [HMRC] is becoming in tackling tax evasion in this area."

Bigger effort
The increased cash being found by the tax authorities was revealed by Freedom of Information Act requests lodged with HMRC by Hacker Young.

They reveal that in 2007-08 the special investigation teams of the Revenue raised £60m in extra CGT while two years later they raised £74m - an increase of 23%.

The work was conducted by teams of special investigators set up in the past three years in the regional offices of HMRC.

Their establishment has come alongside the Revenue's widely publicised campaign to uncover people who are hiding taxable income in offshore bank accounts.

"We risk assess returns using a variety of methods, as well as cross-matching database information, both our own and external," said an HMRC spokesman.

"Enquiries into the disposal of second homes is just one area we look at," he added.

Buy-to-let
CGT is payable on the sale of most assets, not just property.

But Roy Maugham explained that in his firm's experience, a few buy-to-let landlords seemed prone to flouting the rules.

"It is something we are seeing, especially where they do not use an accountant," he said.

"There are quite a number of people who won't have reported it [the sale of their property] in the first place.

"They think they can get away with it," he added.

About 130,000 people paid capital gains tax in 2008-09.

The rules
The profit made on selling a property is liable to CGT unless it is someone's main home at the time of the sale, or was their main home at any time in the three years before.

Sellers also have an annual tax-free allowance of £10,100 to set against any CGT bill.

Even if there is still CGT to pay, a landlord can reduce the bill by offsetting:

the cost of buying the premises, such as stamp duty, legal and surveyor's fees
the cost of selling the property, such as legal or estate agent's fees
the cost of any enhancements at any time in the period of ownership, such as a loft extension or garage or conservatory.
Roy Maugham said it appeared that HMRC investigators were increasingly challenging "enhancement" claims on tax forms because they were really for things like painting and decorating.

Such items do not qualify for tax exemption as they are not capital expenditures.

"The landlords sometimes feel they have had the costs but can't prove it, because they haven't kept the necessary paperwork," Maugham said.

"Many HMRC investigations lead to disagreements over whether some costs are repair costs or enhancement to the property.

"HMRC often challenges the records for expenditure going back 20 years or more," he warned.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Ministers ask public sector staff to suggest savings



Voice your opinion

Six million nurses, police officers and other public sector workers have been asked to suggest options for cuts as Budget debate has intensified.

David Cameron and Nick Clegg contacted staff to ask them to find "fair" cuts, a move condemned by unions.

Meanwhile senior Lib Dem Simon Hughes warned coalition colleagues against making cuts to benefits for pensioners.

But he backed away from earlier suggestions that he might seek to change the Budget to make it "fairer".

Mr Hughes, the party's deputy leader, said there would be "trouble" if the government sought to "unpick" aspects of the coalition agreement between the Conservatives and Lib Dems - such as guarantees to protect the winter fuel allowance.

And Labour leadership contender Ed Balls told the BBC's Question Time programme, to be broadcast later on Thursday, this was the "most unpleasant Budget for a very long time".

Labour say proposed 25% average cuts in departmental budgets, which will be determined in an spending review in October, are reckless and will hurt vital services.

As part of the spending review process, ministers are asking public sector workers to suggest services they believe are non-essential, how services can be better targeted or provided more effectively by private and voluntary groups.

'Serious' ideas
Deputy PM Nick Clegg said the coalition government was "prepared to look at any innovative idea, however bold, however radical, however off the wall it might seem to people" if it could save money in a way that was fair and protected "frontline services".

He said that all "serious" ideas would be passed on to officials for consideration and that workers would be invited to discuss their suggestions face-to-face with civil servants.

In their letter, Mr Cameron and Mr Clegg say they want workers "to help us find those savings so we can cut public spending in a way which is fair and responsible".

But Mr Kenny, general secretary of the GMB union, said: "Cameron and Clegg have a damned cheek in asking public sector workers to co-operate in sacking thousands of them. It is an utter outrage."

He said unions were "perfectly capable of speaking up on their behalf" and would be resisting "savage cuts in public services".

'Big differences'
Meanwhile research by the respected economic think tank the Institute for Fiscal Studies which said "progressive" reforms in the Budget had largely been announced by the previous Labour government and the new tax and benefit changes were "regressive overall".

But Mr Clegg said that excluded measures that were being introduced. He told BBC Radio 4's Today programme: "The top earners make a much bigger contribution than anybody else."

He said "very exceptional measures" were being taken to instil "fairness" into the Budget - pointing to the raising of the income tax personal allowance, which is estimated to take 800,000 low paid people out of income tax altogether, and a £150 increase in child tax credits for 1m low income families.

"These are big measurable differences which will help people who are on low pay."

Critics have questioned whether cuts of the scale outlined in the Budget are achievable.

Chancellor George Osborne is already coming under pressure to find more savings from the welfare budget, in addition to the £11bn earmarked in his Budget statement, to minimise the impact on budgets for the police and schools.

Mr Clegg said the number of people on disability benefit had tripled and added: "I think there are some areas of welfare where it is totally right to ask ourselves whether we can spend money more effectively to help people most in need."

Fairness agenda
Amid talk of Lib Dem dissent over the Budget, Simon Hughes - the most senior Lib Dem MP who is not a member of the government - said he backed the Budget but suggested he might seek to table amendments to make it "fairer".

Speaking in Parliament, he warned ministers against any further cuts which would breach the coalition agreement between the two parties.

"There cannot be any unpicking of items in that deal," he said. "Otherwise the whole thing risks falling apart.

Although there was "no suggestion" this was the case, he added: "The deal has to be that we go down the committed road we have signed up to... And if there is any suggestion that it changes there clearly would be trouble."

Mr Hughes later issued a "clarifying" statement, saying that he had "no plans" to try and amend the Budget while stressing the public spending review must be "driven by fairness".

'Economic madness'
The BBC's Deputy Political Editor James Landale said Mr Hughes' comments were a warning that although Lib Dem MPs were on board at the moment, their support could not be taken for granted.

Shadow Business Secretary Vince Cable said the coalition would "stick together" in the face of criticism over the Budget. He said the cuts were "tough and unpleasant" but defended them.

"We have a economic emergency," he told the BBC's Question Time. "It is very, very serious. It has had a massive impact on the public finances which have to be sorted out."

Labour say the cuts are based on an ideological desire to reduce the scope of the state, rather than sound economic reasons, and have challenged uneasy Lib Dem MPs to vote against it.

"Cutting spending now, and this deeply, while raising taxes will lead to more unemployment, slower growth and higher borrowing," Ed Balls said.

"It is back to the 1930s, back to Thatcherism for the 1980s and I can't understand why progressive Liberal Democrats can go along with this economic and social madness."

We asked those of you working in the public sector for suggestions on how to cut costs. Please find a selection of your comments below.

Voice your opinion

I am a midwife working on the front line in clinical practice and one of the biggest costs is the rise in recent years of caesarean sections and the implications of this. There are the costs of extra time and staff and longer stays in hospital. As for the structure of the NHS itself, it is extremely heavy with hierarchical management and has far too many layers in most areas. I don't wish anyone to lose their jobs especially in the economic crisis that continues to face us all, but the general structure of the NHS does need reviewing. Whilst I may not agree with all that the government is suggesting, I do respect them for sticking to their guns and doing what is extremely difficult and unpopular. All working within the NHS are equally responsible in reducing costs and wastage where possible.

Jackie Reszko, Deeping St Nicholas

So let's get this right - they're cutting my pay for two years, taking away a pension I have paid 11% of my wages into for 26 years, cutting 25% of my employers' budget and now they want me to tell them which colleagues I recommend they sack?!

Mike , Nottingham

I work in the NHS and the amount of waste that I see is criminal. There are also plenty of perfectly decent people working here who, for all they do, are frankly a waste of taxpayers' money. There is too much pointless form filling. Trying to get anything done is like wading through treacle. This has mostly come about under the last government. If the NHS was run properly, it could probably have its budget slashed without affecting frontline services. I'm pretty sure the organisation could manage perfectly well without me!

Andrew, Lancashire

It is very, very wrong in my opinion for the government to ask public sector workers where they think cuts should happen. Not only does this reek of deferral of government responsibility - as it is they who should decide where the cuts will occur since they have been charged by the people of the country to do so - but it is like asking someone what they would like to have amputated, an arm or a leg? Very, very wrong.

Roy , UK

I have worked across a number of public sector bodies as a senior interim manager and it strikes me that there is incredible amount of money wasted operating the procurement process. Quite often the internal cost of operating the procurement process is far higher than the cost of the items procured. Items and services that are procured often cost more than buying off the shelf and also take significantly longer to procure wasting both time and money. Often the end product that is procured doesn't meet the actual business requirement of the organisation ending up with the procured item/service not being used. I can list examples of all of these elements that run into many millions of pounds, that I have seen within multiple public sector organisations.

Allan Hinchliffe, Chelmsford

As an NHS employee, I would say that communication needs to be improved first and foremost, closely followed by greater scrutiny of the decisions made about contracting out third parties for services. We see departments and the "higher ups" making decisions independently, which don't always knit together very well and lead to problems. The wrong equipment is bought, or it's fitted in the wrong place, or an IT department is moved into a refurbished office before the network points are set up and lose a day of productivity. More care needs to be taken about the prices paid to contractors and the backhanders and nepotism that is no doubt involved. These decisions should be audited with sound justification for the decisions made. I'd like to see more stuff done in-house - the NHS is big enough after all.

Laura , Birmingham

I am an ICT teacher in a community secondary school. I find it staggering how much money is wasted on LEA Advisors - basically former teachers who now work for the LEA and go into schools to advise teachers and organise local meetings. They get paid a hell of a lot and also get the same holidays as teachers. Considering what I get paid and the amount of money spent on my training, surely I can now be expected to be able to decide what to teach and how to teach it without these advisors? Every single local authority has these advisors and there are quite a few of them, including some that specialise just in Assessment for Learning or Behaviour. They spend their days popping into schools offering their advice and if no one wants it they basically sit about for a few hours drinking tea and having a chat. The subject advisors get to spend their time creating resources and teaching materials, reading about new initiatives and preparing themselves for a return to teaching, which they are all after doing and hope for a position higher than they were in before. It's an absolute joke. If we have them, why on earth do we now have Advanced Skills teachers and Excellent Teachers?

Vikki Dodd, Chorley, Lancashire

I work in a local doctor's surgery and the amount of drugs that are requested but not needed by people who do not pay for these items, usually on a repeat prescription, is unbelievable. I know some elderly people, instead of checking what they need, just tick all the boxes and end up stockpiling these drugs. It goes on all over the country, wasting thousands of pounds. I would suggest a nominal amount per item for everyone right across the board. This would mean low paid and part time workers, who actually pay into the system, do not have to pay so much and it would be fairer for all.

Brenda Jameson, Sunderland, Tyne and Wear

I work for a company that supplies the government. The amount of waste on stupid things like food, drinks, entertaining, travel and hotels is scandalous. But if they all made an effort to treat government resources as they do their own money, looking for the best travel deal for example, they would save billions overnight. And what about sourcing hospital food locally? In Nottingham, it saved the NHS Trust £6m a year - think of the savings if that were replicated nationally?

Anon, UK

As a low paid council worker who has already taken an 8.5% pay cut this year due to "job evaluation", placing my salary on just £14,500 PA, my view is that councils are top heavy with management, all earning far more than they are worth. Councils should be looking at cutting back on the number of management jobs instead of frontline staff, many of whom like myself work hard and are on very low salaries.

Graham , Ayrshire

I work in an office for the NHS and we have several people undertaking a professional qualification that is costing £10,000+ per person. Whilst the person is attending college and not in the office, they are paid. Other staff at the same level do not get these benefits as it is not offered to everyone, and now those staff who have not been given the opportunity are being redeployed. If you ask me, people shouldn't be paid for the days they are not in work - why should the rest of us suffer so they can get ahead?

Anon, Merseyside

As a police officer, I have made financial sacrifices to pay 11% into my pension, increased the size of my mortgage and put in place all manner of savings plans to ensure that, on retirement, I can clear my mortgage and assist both my children with further education. This has been financial prudence, yet the government now want me to sacrifice that for a worldwide banking crisis that happened due to the USA sub-prime mortgage fiasco. It beggars belief and is simply unfair.

Tony Abigail, Norwich

Voice your opinion

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Home owners given new protection by FSA



New rules to protect struggling mortgage holders have been outlined by the Financial Services Authority (FSA).

The rules seek to help people who have fallen behind on their mortgage payments, with the FSA saying they must be treated fairly by lenders.

The FSA also wants to ensure all mortgage advisers have been approved as "fit and propoer" persons.

It has also announced new rules for staff and firms operating in the "sale and rent back" market.

Keeping records
Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:

firms must not apply a monthly charge where a repayment agreement for arrears is already in place
any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
repossessions should always be the last resort.
In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years.

'Vital' changes
There are also tighter controls governing "sale and rent back" arrangements, whereby a borrower who cannot keep up repayments opts to sell their home, but stay in it as a tenant.

From 30 June, the measures the FSA are introducing will include:

a ban on high-pressure sales techniques
a 14-day cooling off period for customers to allow them to take more time over the decision
a ban on cold-calling and dropping leaflets through letter boxes
security of tenure for customers of at least five years
Lesley Titcomb, the FSA director responsible for the mortgage sector, said sale and rent back was often used by people in a hurry to stay in their homes.

"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter rules were vital," she said.

The Housing Minister, Grant Shapps, said he was reveiwing his department's support schemes for home buyers in difficulty. Meanwhile, he said, the new rules should provide reassurance: "These tougher rules from the FSA will mean fairer treatment for struggling homeowners, and will ensure that lenders must exhaust every possible option to help before taking repossession action."

'Clean game'
The consumer rights lobby group, Citizens Advice, which has received more than 100,000 enquires about lending arrears over the past year, welcomed the FSA's changes, but said a closer eye should be cast over charges levied by some companies on customers in arrears.

It says some clients of its Wiltshire bureau had reported charges of £115 for each month they were in arrears with their mortgage with a sub-prime lender.

Citizens Advice head of consumer policy, Sue Edwards, said: "Citizens Advice Bureaux regularly report cases where large fees have been levied for various arrears procedures, which have simply added to the clients' problems. In many of these cases, it is not clear to either the client or their adviser how the firm has calculated the cost."

The Council of Mortgage Lenders (CML), whose members account for 94% of all mortgage lenders in the UK, said 46,000 homes were repossessed last year, the highest number since 1995.

It picked out the requirement for an adviser to be an "approved person" as an unnecessary additional cost on lenders.

But, the CML's director general Michael Coogan conceded that overall the FSA's changes were helpful.

"While we may feel somewhat harshly treated in relation to the treatment of lenders under the approved persons regime, we do recognise that the FSA is trying to make sure there is a clean game," he said.


Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

How to make your shopping list VAT-free


Despite descenting comments condemning the 2.5% hike in Vat as regressive I've always thought the opposite, believing it a fairer alternative to hiking basic rate Tax and/or National Insurance rates as the less well off can avoid paying it on necessities.

This submission by Rosie Murray-West and Kara Gammell on Telegraph.co.uk seems to support that view:

If you're worried about the impact of the increase in value added tax (VAT) to 20pc in this Budget, you're not alone. According to shopping comparison website mySupermarket.co.uk, the tax will add an annual average of £33 to each supermarket shopper's basket when it comes in on January 4. For many families reliant on convenience foods, the cost will be far higher.
That's before you even start looking at the extra costs of petrol, clothes, cars, whitegoods and services. Fortunately for the shopping-savvy, there are ways you can beat the tax rise. That's because VAT is a tax of complications and anomalies, and it's possible to cut it out of a substantial part of your shopping basket.

More than 40pc of shoppers will change their spending habits in response to an increase in VAT, according to research by accounting and business services group RSM Tenon.
If you know what is and is not subject to VAT, then you'll be able to adjust your shopping accordingly.
VAT law is supposed to split your supermarket shop between two categories; essential foods, which are zero-rated so that you don't pay any tax, and luxury foods that will be subject to a 20pc tax.
However, because of the difficulty of deciding what constitutes a luxury item, it's possible to buy very similar products at 20pc less than others because they are VAT-free.
Daniel Lyons, VAT partner at accountancy firm Deloitte, said that VAT law was "like French irregular verbs" because there are so many exceptions.
"It used to look fairly sensible 30 years ago, but economics have changed and new products have come on the market," he said.
Jonny Steel, spokesman for mySupermarket.co.uk, said: "There are some strange discrepancies between the types of foods that qualify for VAT, making it hard to predict where the increase will hit shoppers most."
Top tips for those wanting to avoid the tax rise include buying wheat-based snacks or tortilla chips instead of potato crisps, as well as buying ''freshly baked food'' from supermarket bakeries while it is still warm, rather than ''takeaway hot food'' from the takeaway counter, as this will attract VAT.
When buying gingerbread men, check how much chocolate they have on them – any more than a few dots for the eyes and you will be paying VAT.
Perhaps the most important thing to remember concerns nuts and dried fruit. If you buy them in the baking aisle, you're probably not paying any tax, but if you buy them from the snack aisle you'll be paying the full 20pc VAT. Given that you're probably paying a mark-up for packaging anyway, it makes sense to buy them in bigger bags.
VAT SHOPPING LIST
- Takeaway hot food £1.09
- Cereal bars £1.98
- Partly or wholly chocolate-covered shortbread £1.59
- Crystallised ginger £2.04
- Raisins packaged for snacks 70p
- Squash £1.09
- Potato crisps £1.69
- Ready-made popcorn £2.60
- Prawn crackers made from cereals £1.48
- Shelled roasted or salted nuts £1.15 for 100g
- Ice cream and ice lollies £3.99
- Chocolate-coated biscuits £1.25
- Gingerbread men with chocolate decorations 99p
TOTAL: £21.64
NON-VAT SHOPPING LIST
- Freshly baked food £1
- Flapjacks 73p
- Millionaires Shortbread (with caramel layer) £1.19
- Ginger in syrup £1.85
- Raisins packaged for baking 18p
- Milkshake and flavoured milk drinks 85p
- Crisps made of other vegetables and wheat-based snacks such as tortilla chips 89p
- Microwave popcorn £1.99
- Prawn crackers made from tapioca £1.62
- Roasted or salted nuts still in shells or packaged for home baking 65p for £100g
- Frozen ready meals and baked Alaska £2.97
- Chocolate chip biscuits 49p
- Gingerbread men with a few dots of chocolate for eyes 65p

Given the recent reports on the harmful affects of trans fats I would support Vat being applied to such foods. Again there would be a choice to avoid Vat and be fitter too!

This Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Thursday 24 June 2010

Hike in VAT will hit consumers at the tills, in pubs and at the pump

James Thompson writes for Independent:

The government forecasts that the rise in VAT to 20 per cent will fill the Treasury coffers with an additional £13.5bn in the final year of this Parliament in 20015 – making it the biggest driver of revenues unveiled yesterday.


But the rise will hit consumers every single day from 4 January next year whether they are buying clothing, going to the pub, filling up their car, eating at a fast-food restaurant or booking holiday accommodation in the UK. In short, this regressive tax, which takes no account of a person's ability to pay, will hit those on the lowest income the hardest.

In real terms, the VAT rise will add 2.1 per cent to the price of everyday goods, leading to an extra 2.5p on a litre of petrol, 12p on a packet of cigarettes and an average of 7p on a pint of lager, according to Kelkoo, the price comparison website.

The only good news for hard-pressed UK consumers is that the Chancellor wrong-footed some forecasts by keeping items classed as "essential", including food, children's clothing, newspapers and magazines, exempt from VAT.

George Osborne said: "The years of debt and spending make this [VAT rise] unavoidable." The Treasury has forecast that the rise in VAT will generate additional revenues of £12.1bn in its first full year of implementation in 2011/12, but this would rise to £13.45bn in 2014/15.

But Harriet Harman, the acting leader of the Labour Party, said that rise in VAT "punished the poorest the most", saying it would leave pensioners, for example, with less money to spend. The Government hopes that by delaying the increase in VAT till January, it will minimise the impact on consumer spending at a time when the recovery is fragile. But economists fear that the rise in VAT could trigger a sharp rise in inflation and therefore higher interest rates, which could lead to a "double-dip" recession.

Simon Newark, a VAT partner at the accountancy firm UHY Hacker Young, said: "A VAT hike could push up prices on the high street by around 2 per cent, which would have a very significant impact on inflation. Higher inflation could trigger interest-rate rises, risking the spectre of the double-dip recession."

The impact on consumer spending of the rise in VAT will be most marked on big-ticket items, such as TVs and washing machines. According to the price comparison website Kelkoo, the price of a Lady Gaga CD will only rise from £8.95 to £9.14 in January, but it would add £63.79 to a sofa from DFS priced at £2,995.

Yesterday's survey by Kelkoo also found that after the change in VAT, 43 per cent of Britons will spend less once the new rate takes hold. Of those surveyed, the biggest group at 30 per cent said they would cut back on dining out. Following closely behind, 28 per cent said they would reduce their spending on home entertainment, such as music, DVDs and video games, and 26 per cent plan to trim their expenditure on travel, holidays and hotels.

Based on a survey of 2,000 people and their spending plans with VAT at 20 per cent, consumers will spend £324 per person less on retail goods from £1,836 to £1,511, said Kelkoo.

Stephen Robertson, director general of the British Retail Consortium, said: "We didn't want a VAT increase. It'll hit jobs, consumer spending, the pace of recovery and add to inflation, but we accept the Government has no easy options."

In May, the BRC warned that increasing VAT to 20 per cent would cost 163,000 jobs and reduce consumer spending by £3.6bn over four years. While opinion among retailers was divided about how much spending the recent rise in VAT sucked forward, many shoppers did snap up big ticket purchases before it went back up to 17.5 per cent on 1 January 2010.

The accountancy firm Deloitte said that the average worker earning £24,000 will pay an extra £183-a-year as a result of the VAT rise.

The rise in VAT will also hit motorists at the pump. The Automobile Association said with fuel duty going up 1p a litre in October and another 0.76p a litre on 1 January, the hike in VAT adds £117.98 to the annual cost of fuel for a family with two petrol cars, based on today's prices.

For pub goers, the Campaign for Real Ale said the VAT increase would add 10p on to a pint of beer and would increase the rate of pub closures from the current level of 39 a week in the struggling sector.

But in a rare piece of goods news for the nation's drinkers, the Chancellor did not unveil an increase in beer tax in yesterday's Budget.

Brigid Simmonds, the British Beer and Pub Association's chief executive said: "We applaud the Government's decision to freeze beer tax and deliver on its promise made in the coalition agreement to not penalise pubs, responsible drinkers and important local industries."

ZERO AND REDUCED-RATE VAT

0%: Books, children's clothing and footwear, lottery tickets, maps, magazines, and food. (Some food and drink items, such as snacks and alcoholic drinks, are standard VAT-rated.)


5%: Children's car seats, gas or electricity for domestic usage, energy-saving materials, smoking cessation products, contraceptives and women's sanitary towels.

Case Study: 'This will have a huge effect on some firms'

Tom Harvey, 33, of the Lake District, runs Clocktower Electrics with his parents in Cumbria. They employ four other members of staff, selling washing machines and domestic appliances, with a turnover of £300,000.


"The VAT rise was what we expected. For retailers selling non-necessity items or with extremely low margins, it could have a huge impact. Some businesses will have to look at their business models and see whether they work now they need to incorporate this higher level of tax. But for us, I don't think the VAT rise will make too much of a difference. We might see a bit of a boost in sales beforehand and people might start buying appliances at the cheaper end of the scale. But if your washing machine is broken, it needs replacing; it's not something you can put off. I don't think an extra £10 on a £500 washer is going to make any difference to people. So I think raising the VAT is a sensible way of balancing the books.

"I'm happy to see a reduction in corporation tax in the budget – it will be very beneficial to small companies like ours and can only be a good thing. "Small businesses" to the government can mean around 200 employees, not five. Enterprise schemes and so on are snapped up by the bigger companies and it can feel like small and medium sized businesses are ignored.

"I believe in conservative values both at home and as a business owner. I have always voted Conservative and will continue to do so unless they make a big mistake. I think the Government put forward a strong budget."



Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Tuesday 22 June 2010

Budget: Osborne's 'tough' package puts VAT up to 20%


Posted on BBC website:

Chancellor George Osborne increased VAT from 17.5% to 20% and cut welfare spending as he moved "decisively" to tackle Britain's record debts.

Child benefit and public sector pay will be frozen and 25% cut from public service spending - but alcohol, tobacco and fuel will escape tax hikes.

Unveiling his first Budget to MPs, Mr Osborne said "tough but fair" action on debt was "unavoidable".

But Labour said it was "reckless" and would "throw people out of work".

Acting Labour leader Harriet Harman said Mr Osborne's budget would stifle growth and hit hardest "those who can least afford it".

Chancellor George Osborne increased VAT from 17.5% to 20% and cut welfare spending as he moved "decisively" to tackle Britain's record debts.

Child benefit and public sector pay will be frozen and 25% cut from public service spending - but alcohol, tobacco and fuel will escape tax hikes.

Unveiling his first Budget to MPs, Mr Osborne said "tough but fair" action on debt was "unavoidable".

But Labour said it was "reckless" and would "throw people out of work".

Acting Labour leader Harriet Harman said Mr Osborne's budget would stifle growth and hit hardest "those who can least afford it".

BBC Political Editor Nick Robinson described the financial statement as a "massive gamble economically and politically".

It represents a major departure from the previous government's economic policies, with business leaders saying they hoped it would be a "defining moment" in Britain's economic recovery.

But trade unions have warned hundreds of thousand of jobs could be lost in the public services, potentially wrecking local economies and sparking a "double-dip" recession.

Setting out his plans in the Commons, Mr Osborne said "decisive" action was needed to prevent a "catastrophic collapse" in economic confidence but stressed it would be done in a "fair" way with the better-off shouldering most of the burden.

"Everyone will pay something but the people at the bottom of the income scale will pay proportionately less than those at the top. This is a progressive Budget," he said to jeers from Labour MPs.

UK households, on average, will be about £400 a year worse off, Budget documents suggest, with the poorest 10% losing £200 and the richest £1,800, although the poorest will be hit harder than most as a percentage of their income.

Mr Osborne vowed to balance Britain's books within five years, with the bulk of the savings to come from cuts to benefits and public services rather than tax increases.

And he laid the blame for the state of the nation's finances squarely at the door of the previous Labour government, saying: "The years of debt and spending make this unavoidable."

'Biggest gamble'

Tax credits will be cut for families earning more than £40,000 a year - and there will be a two year pay freeze for public servants paid more than £21,000. Those earning less will get a £250 rise for two years.

Mr Osborne also announced real terms cuts across all government departments of 25% over four years - except health and foreign aid which are ringfenced.

Will Hutton, of the Work Foundation, who is advising the government on public sector pay, described the cuts as "brutal" and questioned whether they were achievable without wrecking the coalition government.

He described Mr Osborne's Budget as the "biggest gamble a post-war government has made".

The full details of the impact of the cuts will not be revealed until Wednesday 20 October, when Mr Osborne publishes his spending review.

The VAT increase, which Mr Osborne said would raise £13bn a year, is to come into effect in January.

Capital gains tax will be increased to 28% for top rate taxpayers - less than the 50% some Conservative backbenchers had feared. This will come into effect at midnight.

In other moves, Mr Osborne pledged to pledge to link pensions to earnings - or prices or 2.5% if they are higher.

Housing benefit will be reformed with a maximum limit of £400 a week, in a package saving £1.8bn a year by the end of the Parliament.

Other benefits to be cut include the health in pregnancy grant while the Sure Start maternity grant will be restricted to the first child only and lone parents will be expected to look for work when their youngest child goes to school.

Bank levy

But there will be an extra £150 a year for the poorest families, through changes to family tax credits.

The government is also to introduce a medical assessment for Disability Living Allowance from 2013 for new and existing claimants.

Mr Osborne also announced plans to help the low paid by raising personal tax allowances, taking an estimated 880,000 people out of the tax system and give millions of basic rate taxpayers a tax cut of £200 per year.

From January 2011, the government will introduce a bank levy, which will apply to the balance sheets of UK banks and building societies and the UK operations of foreign banks. Mr Osborne said the move would raise £2bn a year once it was fully in place.

Mr Osborne said public sector workers paid more than £21,000 a year would have a two year pay freeze with those paid less getting a flat pay increase of £250 for the next two years.

The plan is the first step towards a key Liberal Democrat coalition demand of taking all those earning less than £10,000 out of tax.

'Enterprise-led recovery'

The chancellor must find £3.5bn to pay for the giveaway - which will be clawed back from top rate taxpayers - and Labour are likely to argue it is irresponsible in the current climate.

Mr Osborne also froze the Civil List payments to the Royal Family at £7.9m a year and said in future years they would be subject to scrutiny by the National Audit Office.

He stressed that the pain of his austerity measures would be shared by "everyone" - but said all would share in the proceeds of the "enterprise-led recovery" that he promised would follow.

"Yes it is tough, but it also fair," said Mr Osborne of his first budget, adding: "Everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it."

He said that the Office for Budget Responsibility (OBR) now estimated growth this year of 1.2% and 2.3% next year - compared to its previous forecasts of 1.3% of 2.6%.

Giving her response to Mr Osborne's statement, acting Labour leader Harriet Harman poured scorn on the Liberal Democrats for providing a "fig leaf" for their Conservative coalition partners, arguing "this reckless Tory budget would not be possible without the Lib Dems".

'Irresponsible'

"The Lib Dems leaders have sacrificed everything they ever stood for to ride in ministerial cars and to ride on the coat tails of the Tory government," she added.

Plaid Cymru also lashed out at the Lib Dems, with Treasury spokesman Jonathan Edwards accusing party leader and Deputy Prime Minister Nick Clegg of sitting next to Tory leader David Cameron "like a nodding dog, agreeing with every word as VAT was raised".

"They are running out of major election policies on which to U-turn," he added.

The SNP welcomed some Budget measures, such as the freeze on whisky duty and the restoration of the pensions and earnings link, but branded planned spending cuts "irresponsible".

In a message to Liberal Democrat supporters, Deputy Prime Minister Nick Clegg said the government had "no choice except to clear up the financial mess that Labour left us".

And he said the Budget had taken "difficult decisions in an honest and fair way and with the clear stamp of Liberal Democrat values running through it," citing examples including the restoration of the pensions and earnings link and the tax boost for the low paid.

'Breadline Britain'

Lib Dem Deputy Leader Simon Hughes, who has vowed to protect the party's core values, issued a statement in support of Mr Clegg after the Budget statement, saying it would protect the "needy and vulnerable".

So far only one Lib Dem MP, Bob Russell, has publicly suggested he might vote against the Budget, as the party had campaigned against VAT increases at the election because "the low paid disproportionately pay more".

He told BBC Radio 5 Live: "I am not at all happy. I need to discuss with colleagues how it is we have got into this situation."

Dave Prentis, general secretary of public service union Unison accused the coalition government of "declaring war" on public services, saying the Budget would "raise the spectre of breadline Britain" in some parts of the country.

"Public sector workers will be shocked and angry that they are the innocent victims of job cuts and pay freezes".

But CBI director general Richard Lambert called the Budget "the UK's first important step on the long journey back to economic health".

Green MP Caroline Lucas called Mr Osborne's statement a "budget for pointless austerity" full of cuts that were "neither unavoidable or fair".

But in an e-mail to Conservative supporters, Prime Minister David Cameron said: "In this emergency Budget I believe you have the measure of this government.

"Will it provoke debate? Certainly. Will it cost our coalition some popularity? Possibly. But is this the right thing to do - for the health of our economy, for the poorest in our society, for the future of our country? I passionately believe it is."

Budget in detail

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Budget: Osborne to lift tax allowances to help low paid


The rate at which people start paying tax will rise by £1,000 in the Budget but ministers face likely criticism over tax rises and cuts elsewhere.

Nearly 900,000 people earning less than a £7,475 will pay no tax under plans set to be announced by Chancellor George Osborne on Tuesday.

Mr Osborne will say his deficit-cutting package will be "tough but fair" and that the better-off will pay more.

But Labour say the poorest will be hit and cuts are ideologically driven.

They say the economy is too weak to withstand such a spending squeeze and the move could push the UK back into recession.

Mr Osborne will deliver his and the coalition government's first Budget at 1230 BST (1130 GMT), fulfilling the Conservatives' pre-election pledge to hold a Budget within 50 days of coming to office.

Mr Osborne has said the Budget will set out "tough" but necessary plans to bring down borrowing over the next four years and how this will be divided up between spending cuts and tax rises.

The package of austerity measures is widely expected to be toughest for generations.

The government says borrowing levels inherited from Labour - which are set to total £155bn this year - are unsustainable and delaying action will damage market confidence in the UK and store up worse financial problems for the future.

Tax allowances

The chancellor is expected to announce a number of revenue-raising measures, including a levy on bank profits, an increase in capital gains tax and rises in cigarette and alcohol duties while a change in aviation tax is also expected.

But opposition, unions and employer groups have all expressed concerns about the steps being planned amid continuing speculation of a rise in VAT and a freeze on public sector pay beyond the one-year already planned in 2011-2012.

A Labour Party spokesperson said: "The real test for the Budget is what it means for jobs and growth.

"Of course no-one's going to object to an increased personal allowance.

"But if it's paid for by a VAT rise the Tories said they wouldn't implement, and that the Liberals campaigned against, the public will rightly feel short changed."

The BBC's Political Editor Nick Robinson said the government's plans to raise personal tax allowances will take an estimated 880,000 people out of the tax system and also give millions of basic rate taxpayers a tax cut of £200 per year.

The plan is the first step towards a key Lib Dem coalition demand of taking all those earning less than £10,000 out of tax.

The chancellor must find £3.5bn to pay for the giveaway - which will be clawed back from top rate taxpayers - and Labour are likely to argue that it is irresponsible in the current climate.

But Nick Robinson said it will be clear from the chancellor's statement that overall people in all income groups will pay more as a result of other tax rises, spending and benefit cuts and limits to public sector pay and pensions.

However, he has said it is "far from certain" that VAT will rise from its current 17.5%.

'Fiscal bombshell'

In an e-mail to Lib Dem members on Monday evening, Deputy Prime Minister Nick Clegg said the budget deficit amounted to a "fiscal bombshell" that had to be dealt with.

"Without action on the deficit, we will carry on racking up unaffordable debts our children will have to pay off," he said.

"We will carry on spending more money on debt interest than we do on our schools.

"And we will undermine the economic growth needed to create jobs and opportunities for all of us. There is nothing fair, liberal or progressive about any of that."

He rejected claims that the Liberal Democrats had "sold out" after they campaigned during the election against early spending cuts due to the fragility of the economic recovery.

"We have always argued that cuts would be necessary, but the timing should be based on economic circumstances, not political dogma," he said. "The economic situation today means that time has come."

'Hardest thing'

Mr Clegg said the economic situation in Europe had deteriorated in recent months while Labour had exacerbated the situation by making a large number of unfunded spending promises in its last few months.

"So cuts must come," he added. "We have taken the difficult decisions with care, and with fairness at their heart. You will see the stamp of our Liberal Democrat values in tomorrow's Budget. But nonetheless, it will be controversial.

"This is one of the hardest things we will ever have to do, but I assure you, the alternative is worse: rising debts, higher interest rates, less growth and fewer opportunities."

Other measures widely forecast to be included in the Budget include a cut in the headline rate of corporation tax, a two-year freeze in council tax and the scrapping of Labour's planned 1% rise in national insurance contributions paid by employers.

Unions have said any tax rises must fall predominately on the better off while business groups have called for radical reform of public services to avoid across-the-board tax increases.

"This needs to be a bold and ambitious Budget, with a credible pathway for restoring sound public finances and a convincing narrative for growth," the CBI's deputy director general John Cridland said.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Sunday 20 June 2010

Budget 2010: Britain on 'road to ruin' without cuts


Britain is "on the road to ruin" unless action is taken in the Budget on Tuesday to cut the deficit, Chancellor George Osborne has told the BBC.

Mr Osborne said the coalition had inherited "a truly awful financial situation" and he would set out a four-year plan to deal with it.

Tough action was "unavoidable" but he aimed to provide "prosperity for all".

He also announced ex-Labour minister John Hutton would head a commission into public sector pensions.

Mr Osborne told the BBC's Andrew Marr Show that Mr Hutton's involvement would mean the commission into future pensions would be independent and have cross-party input.

'Decisive action'
The chancellor refused to give more details of the coming Budget, although the BBC understands it will include Conservative election proposals to ease National Insurance for new businesses.

It is expected the employers' threshold for NI will rise slightly - by £21 and Universities Minister David Willetts confirmed on the BBC's Politics Show there would be measures to boost firms outside of the South East of England.

This is expected to take the form of a three-year scheme to exempt start-up firms elsewhere in the UK from paying NI for the first 10 people employed.

Mr Osborne did not comment when asked about that suggestion, but did confirm there would be a levy on banks and an increase in non-business capital gains tax.

Asked about the "badness" of the Budget, he said: "I don't see it as badness, I see it as decisive action to deal with Britain's record budget deficit.

"We sit here as the country in Europe with the largest budget deficit of any major economy at a time when markets and investors and business are looking around the world at countries that can't control their debts.

"And so we've got to deal with that. In that sense it's an unavoidable budget, but what I'm determined to do is to make sure that the measures are tough but they're also fair and that we're all in this together and that, as a country, we take the steps necessary to actually provide the prosperity for the future."

But amid continuing speculation about large scale spending cuts, Labour leadership hopeful Ed Balls warned that the government was on course to "repeat the mistakes of the 1930s".

He said the cuts and tax rises set to be announced in Tuesday's Budget - which he expected to include VAT increases - showed the "unfairness" of the Conservative-Liberal Democrat government's policies.

Fellow Labour leadership contender Andy Burnham said the Lib Dems had "sold their souls" for jobs in government.

Shadow chancellor Alistair Darling said the Conservatives were "using the current circumstances" as an excuse to make "ideologically driven" cuts they had planned anyway and were "using" the Lib Dems "as cover".

While Mr Osborne declined to set out more detail of what would be in Tuesday's Budget, Prime Minister David Cameron has already suggested public sector pay and pensions will have to be restrained.

He said the budget deficit could not be dealt with by "just hitting either the rich or the welfare scrounger" and the Budget would be when "the rubber really hits the road".

Senior Tories and Lib Dems signed off the Budget on Friday with Mr Cameron, Chancellor George Osborne, Deputy Prime Minister Nick Clegg and Chief Secretary to the Treasury Danny Alexander all present.

Forecaster's warning
The involvement of so many high level figures from the two parties is being seen as an attempt to show the coalition is fully on board with the decisions to be announced in Mr Osborne's first Budget, on Tuesday.

One area of possible unhappiness among Lib Dems might be raising VAT - deputy leader Simon Hughes said "all" Lib Dems have been against it "because it's what's called a regressive tax, everyone pays it irrespective of the wealth you have".

Asked if it would be acceptable for the Budget to include an increase VAT, he said: "It won't be the most desirable outcome."

There have been suggestions some state benefits could be frozen and a survey by ComRes for the Independent on Sunday found 53% of the public backed stripping child benefit from wealthier families - including 47% of Labour voters - with 42% opposed to the idea.

But the government's poverty adviser, Labour MP Frank Field, said he was opposed to means-testing child benefit, which costs taxpayers about £11bn a year.

Meanwhile, the influential economic forecaster the Ernst and Young Item Club, which uses the Treasury's own models to make its predictions, said £48bn worth of spending cuts and tax rises were needed to eradicate the part of the deficit which would not melt away with economic recovery.

Mr Osborne confirmed that Capital Gains Tax would rise in the Budget, despite a free market think tank, the Adam Smith Institute, warning it could actually cost the government as much as £2.48bn in lost revenues.

It argues that higher tax rates will discourage individuals from selling assets, denying the government the CGT they would gain from the sale.Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Saturday 19 June 2010

£50bn in benefits to middle earners


James Chapman write on thisismoney.co.uk:

The welfare system has strayed so far from its original purpose that more than £50bn a year paid by better-off households in tax is then handed back to them in benefits.

Research has revealed an extraordinary welfare 'merry-go-round' which means a third of taxpayer-funded benefits now go to families who earn more than the average income.
In total, 32% of all benefits paid last year - £53.5bn - went to people who are wealthier than average. They include billions paid in incapacity benefit, tax credits and disability allowances.

Even when the universal state pension is excluded, 28% of welfare payments go to the better-off half of the population, a total of £30bn a year.

Critics said millions of people are paying tax and then being 'given' their own money back - minus massive government administration costs.

The analysis of official figures, released last week by the Office for National Statistics, was carried out by the centre-Right think-tank Policy Exchange.

It shows the degree to which the welfare state has strayed from its founding aim of providing a safety net for the worst off.

Over its 13 years in power, Labour introduced hugely complex new benefits, most notably a Byzantine system of tax credits.


›› Why work when I can get £42,000 in benefits a year AND drive a Merc?
Of the major benefits, 43% of child benefit - £4.8bn - goes to those on above-average incomes of around £22,000, it shows.

Most strikingly, 25% of incapacity benefit - £1.6bn - goes to better-off households. This suggests that many of the recipients who have been signed off sick have partners earning decent wages who could support them.

The new government says at least 400,000 of the 2.6m people claiming incapacity benefit are doing so unjustifiably. It has vowed to axe the benefit entirely within four years and move claimants on to other benefits with stricter conditions attached.

The research also reveals that 40% of disability living allowance - £4.2bn - is going to those living in better-off households. The allowance has become one of the most expensive benefits, doubling in cost over recent years.

Gordon Brown's flagship policy of tax credits - supposedly targeted at the poorest households - has resulted in £3.1bn a year, or 13% of payments, going to people on above-average incomes. Critics say Labour's welfare policy was designed to create a generation of 'beholden' voters.

Figures suggest that 30% of households receive half or more of their income from state benefits. They are calling for major welfare cuts to help pay back Britain's £155bn budget deficit and fund income tax reductions.

Neil O'Brien, director of Policy Exchange, said: 'Our benefits system is totally out of control. We're wasting billions on a merry-ground that taxes people and then gives them their own money back in the form of benefits.

'Under Gordon Brown people were encouraged to become more and more dependent on the state. We need a welfare system that allows people to be self-reliant. The last government ran up debts equivalent to £100,000 per family. Now that we need to cut back, wasteful welfare spending is an obvious place to start.'

The coalition government has already taken tentative steps designed to rein in the welfare state, with tax credits for the best off targeted for the axe in next week's emergency Budget.

Former Labour welfare minister Frank Field, who has been appointed as an adviser to David Cameron, is proposing that child benefit payments could stop when a child reaches 13 or 14.



Read more:


Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Friday 18 June 2010

Tesco FD warns against VAT rise

Laurie McIlwee urges coalition to hold off raising VAT to 20% because it would dent the "fragile" economy

Written by David Jetuah and posted on Accountancy Age.

The FD of supermarket giant Tesco has called for the government to freeze VAT at 17.5% because the expected rise to 20% would damage the "fragile" economy.

Laurie McIlwee issued the warning as Tesco unveiled disappointing first-quarter results in a presentation to the City.

advertisement

"The recovery is happening but it's fragile and therefore the
balance is important," said Laurie McIlwee, Tesco's finance director.

"VAT is going to be part of the austerity package but it is a question of when
you do it. The best thing would be to wait a bit."

However, advisers have said the increase would be an obvious revenue-raising move for a government because it would generate about £12bn of revenue.

Putting VAT on food would be "nonsensical", McIlwee added.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Monday 14 June 2010

Cut debt now to control future, says Nick Clegg


Posted on News.BBC.co.uk/:

The government must act now to cut public debt or risk losing its ability to protect people in need, Deputy Prime Minister Nick Clegg is expected to say.

He is to give a speech in London a week before an emergency Budget to set out the government's plans to cut debt.

He will say the debt crisis in Europe has forced "action now so that we can still be in control of our future".

In the general election, the Lib Dem leader campaigned against spending cuts until economic recovery was secure.

But Mr Clegg will tell the Institute for Government: "The choices that were available to us just two months ago are no longer available. We have to take action now so that we can still be in control of our future."

As an austerity drive has swept Europe among countries striving to slash budget deficits, markets have been charging high premiums to buy bonds from governments "whose plans they distrust", Mr Clegg will warn.

"Markets have stopped believing that all European governments can service their debts."

He will add: "We simply cannot afford to let that happen to us too."

The deputy prime minister will say: "By taking action, we do something hugely important: we give ourselves the chance to shape outcome; to do all we can to bring down the deficit in a way that delivers fairness; to protect those who need it most."

To avoid tackling the public deficit "would not only be irresponsible, it would be a betrayal of our progressive values", Mr Clegg will say.

"There is nothing progressive about condemning ourselves and our children to decades of debt, higher interest rates, fewer jobs.

"How will we pursue social justice with billions of pounds of taxpayers' money disappearing down a black hole every year, just to pay the interest on our debt while our schools and hospitals fall apart?"

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Hike VAT say firms


The MailOnline reports:

A VAT hike in the forthcoming emergency budget would be the lesser of various evils, business leaders have declared.
According to a survey by KPMG, 61pc of chief executives say if taxes have to rise, then a VAT rise would be the best option.
A National Insurance increase is the least preferred option, according to 202 executives polled for the accountancy firm by opinion Leader research.
This would be my personal too. At least it would be paid by honest tax payers as well as tax cheats!

The article continues:

Separately, the British Chambers of Commerce urged the coalition to drop plans to ring-fence health and overseas aid spending, saying these are 'unsustainable'.
It also cautioned the chancellor against rushing ahead with the abolition of tax allowances on investment in order to fund a corporation Tax cut.
This requires 'careful study,' the lobby group said.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Friday 11 June 2010

The Cost of Retirement


Landmark reform of the UK pensions system aims to deliver increased financial security for an ageing population. But what impact will it have on small businesses?

We are living longer than ever before. By 2050, the number of people over 100 years old is expected to increase from 9,000 today to 160,000. However, there will only be two tax-paying workers for every pensioner, as opposed to the current ratio of four. To address this, the government has set about making radical changes to the existing pension system to deliver greater financial security for a rapidly ageing population.
In undertaking a landmark reform of the UK pensions system, it has completed a lengthy programme of national consultations, which culminated in the introduction of the Pensions Act 2008. From October 2012, employers across the country will be bliged to automatically enrol their staff into a pension scheme.
"It is in black and white: from 2012, employers across the country will, by law, be required to provide and contribute to pensions for their staff," says Mike Cherry, the FSB's pensions spokesman.
With employer contributions set at three per cent (employees will contribute four per cent, the government one per cent), the reforms are expected to add a significant amount to wage bills.
Evidence collected by the FSB shows that currently the majority of small employers 87 per cent of micro businesses, for example - do not operate occupational pension schemes at all. So, this reform not only represents a significant financial burden, it will also involve a lot of administration.
A simple, low-cost pension scheme, NEST (National Employment Savings Trust), will be launched in 2011 meet the needs of low to medium earners and their 'employers. It will be one of the schemes employers can use to fulfil their duties under the reforms.
While the FSB is in full support of moves to confront the pensions crisis, it is also concerned that the systems in place are overly complicated and is working hard to make them as simple as possible.

The message is clear: the reforms are coming, they will affect every business that employs people, so make sure you are prepared.
"First of all factor in the costs of these reforms into your long-term projections," says Cherry. "Read up on what exactly is required and also start to think about which provider to go with - there won't be a default pension scheme rolled out across the board - it's up to employers to make an informed decision."
"The legislation has gone through Parliament," says Cherry. "All our efforts are now being put into making sure that the operational side of these reforms is simple and straightforward."
Source: The Magazine of the Federation of Small Businesses FIRST VOICE OF BUSINESS
FSB

PENSION REFORMS: THE BASICS
~ Employees between
22 years old and state pension age earning more than £5,035 must be automatically enrolled.
~ Enrolment will be phased in over a period of time, starting with large employers, then medium and then small.
~ Employer contribution levels will be phased in gradually, starting at one per cent, then two per cent, .and finally three per cent. The jobholder's contribution will be
phased in during the same period.
~ Employers will be able to choose the pension scheme(s) they want
to use, provided the scheme(s) meet certain quality criteria.
~ The Pensions Regulator will be writing to all employers one year, and again three months, in advance of their automatic enrolment start date, detailing how to comply.

For more information about the pensions reforms, visit Department for Work and Pensions




Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Thursday 10 June 2010

Is government consultation a bad thing?


I'll bet you in every pub, office, taxi rank, mothers' meeting... there will be a discussion on how they could run the country better than the government. The new government has invited the nation to comment on its plans and yet by my calculation less that 5,500 have posted a comment.

I understand the deadline is at the end of 10 June 2010 so if you have an opinion and I know you do get posting!

Here's my posts. Feel free to comment but make sure you also comment on the government's site too.

I don’t have a problem with DNA being stored in fact I believe everyone’s DNA should be collected and stored at birth. The only persons who should fear this are those who perpetrate criminal activity. This would act as a deterrent and help the police trace criminals sooner reducing the change of creating more victims.

I take a similar view with CCTV. Regulation may be necessary but I’d hate to see this lead to a reduction in the numbers; rather the contrary.

I believe criminals forfeit their human rights when they commit crimes so the rights of victims should take priority over their rights.

I support the changes proposed to the voting system but would prefer to see a Single Transferable Vote (STV) system introduced or at least an Alternative Vote (AV) plus system.

I believe the British Constitution should be taught is schools. With a better understanding of how the different levels of government work from the parish council to Europe and the role of the monarchy and the second chamber, how ever that evolves, which I’m also in favour of, many more might engage with politics and turn out and vote! This appears even more essential as the government roles out greater consultation with the electorate.

Why not introduce a single benefit payable to everyone, and reduce it in a similar way that tax credits diminish as income rises, and do away with all the different means tested benefits employed by both central and local governments. Of course there should be safeguards for vulnerable persons. Those that remain unemployed after say 6 months should have the benefit reduced month by month increasing the incentive to get back to work.

I believe the introduction of tax credits is a good thing and was reasonably efficient when it came into being by using existing vehicles of PAYE and Self Assessment. It was the ending of the use of those vehicles that led to the overpayments and the employment of yet more civil servants.

Civil servants pay rises in the good times so why not reduce in the bad times? Very many of those that pay the taxes and the community charge have suffered. Some have taken lower wages, some are now unemployed or taken on lower paid work and some have gone bust. Reducing civil servants and local authority pay by at least 5% just has to be done. This should be an average 5% with the top earners losing the most and lower paid a lot less.

I love the idea that local communities could share in renewable energy schemes. Maybe it will reduce the numbers NIMBYs!

I noted on Working Lunch they covered a very interesting system which basically involved a firm who installed solar panels for free http://news.bbc.co.uk/1/hi/programmes/working_lunch/default.stm maybe there should be more schemes like this. Could this method be used to increase the use of geothermal heat pumps? I can’t believe how expensive they are to install.

I welcome transparency. I and I would say the whole Nation is fed up of spin; aka dam lies. We deserve to trust that what a politician tells us is the true and not a distortion! This is especially so if the government is genuinely indenting to consult as they have done here. How else can we make reasoned opinions?

Newsnight once broadcast a piece suggesting that it should be a criminal offence to say anything during an election which turned out to be a fabrication! I hope and trust that the new government would encourages a new era setting that culture aside for ne that is open and honest and we the nation can believe and trust!


Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Wednesday 9 June 2010

CIS300 and PAYE payments due 19 June

The monthly returns for payments to sub-contractors, CIS 300, must be received by HM Revenue & Customs by 19 June. If you have not made any sub-contractor payments you may still be required to submit a NIL return.

For those with PAYE and National Insurance payments averaging £1,500 or more per month funds should reach HM Revenue & Customs bank by 22 June. Last day for paying electronically is affectively Friday 18 June. If paying by other means such as a cheque this should reach them by Friday 18 June. Basically HM Revenue & Customs are seeking to receive cleared funds by 22 June.

In previous tax years HM Revenue & Customs have not fined small employers for late payment however from this tax years you could find yourself liable to a penalty of between 1 & 4% of the amount late depending on how many payments are late. There will be no penalty for the first late payment providing it is not 6 months or more late.

If you miss any of the above payment deadlines you can always pay by card by clicking here

For more information on penalties click here

Posted by Joe Martin providing business services for small businesses and the self employed. Go to my web page here

Tuesday 8 June 2010

Answer to Paul_1DayLater who's on Twitter


In answer to your Twitter Paul; I’ll start with a couple of clichés;
Horses for courses! Sledge hammer to crack a nut!

I work from home so my overheads are low. I don’t have fancy offices and a receptionist; there’s just me and my son who works part time bookkeeping for me. I just charge for our time plus Vat and if you’re Vat registered that’s not a problem’ cos as you know; you get the Vat back!

Why would you want to use an accountancy firm that’s capable of dealing with the likes of Marks and Spencer if you’re a small company?

To make a medical analogy I see myself as a GP. If I come across aspects I feel needs the opinion of a consultant, and there have been times when I’ve done, just that. The client might not see much change out of £300.00 but at least they are satisfied that they have the best advice for that situation and not paying in that order for everything else that needs to be done.

I have just taken on two new clients who have used high profile local accountants; both have been local branch committee members of a highly regarded national business institution.

The chairman is likely to see his fees at around about 30% of the previous level. He is local.

The other a former secretary is likely to move to the coast, we don’t have any coast here in Cheltenham, and is not at all daunted by the distance. There are certain aspects of his tax situation I warned him I might not be able to deal with and need to consult with someone with greater knowledge in that field than I have. In the event I shall thoroughly research the aspect and put it to the client. Let’s face it; there’s no point in paying £1,000 for a £900 tax saving.

I’ve also recently taken on my cousin’s limited companies in London, and he found because he was so small everything was late, incurring fines they eventually paid, and it took me ages to obtain information I needed.

So I come back to the clichés do you hire a Bugatti Veyron; yes I’d love one, when a Smart Car will do?

Posted by Joe Martin providing business services for small businesses and the self employed. Go to http://www.joemartin.co.uk

Saturday 5 June 2010

HMRC tax investigations into small businesses yield little compared to larger firms

Posted in bytestart.co.uk

A leading accountancy group points out that tax investigations into large companies are 18 times more productive than those into small businesses.

For every £1 HMRC spent on investigations into multinationals during 2008/09, they clawed in £181 of tax. In contrast, tax investigations into SMEs and private individuals only generated £10 of extra tax for every £1 invested.

Roy Maugham, Tax Partner, of UHY Hacker Young says: “The Government is under pressure to reduce the UK budget deficit and the expectation is that they will try and collect more money from tax investigations. If that is the case these figures suggest that HMRC should avoid focusing on SMEs.”

“Not only are the amounts of money to gain from investigating SMEs far smaller but also small businesses feel the pain of tax investigations much more acutely than multinationals.”

The Liberal Democrats made a manifesto pledge to collect an extra £4.6bn by clamping down on tax in avoidance.

The accountancy group explains that when a smaller company is investigated by HMRC a higher percentage of that business's senior staff will be tied up dealing with HMRC than with a larger company.

“Many smaller businesses won’t have an internal finance function to help deal with a tax investigation. The most senior managers may have to sit in meetings with HMRC and they will probably have to pay for external tax advice.”

In the past 12 months though, HMRC has generated £4.9 billion through tax enquiries into multinationals, but just £359 million from Self Assessment business and personal tax enquiries.

“If we are set for a period of more frequent and more aggressive tax investigations we hope that HMRC shows some sympathy for SMEs – the statistics show it would be in HMRC’s favour if they did.”

Posted by Joe Martin providing business services for small businesses and the self employed. Go to http://www.joemartin.co.uk

Parents 'breaking law' on car insurance


By Brian Milligan
Business reporter, BBC News

Millions of parents are said to be breaking the law in order to save money on car insurance for their children.

New figures suggest that 41% of parents deliberately lie when filling out policy applications.

Parents are claiming to be the main drivers on the policy, when in fact it is one of their children who is the main driver, or owner of the car.

The practice is known as fronting, but could lead to prosecution.

It is attractive for people, because it potentially offers large savings.

Findings
Research by Co-operative Insurance found that 41% of parents were actually fronting policies at the moment, and 61% would do so in the future.

Continue reading the main story
[Parents] are not only risking prosecution, but harming their chances of obtaining insurance in the future

Tim Franklin
Co-operative Financial Services
Cutting the cost of car insurance
Typically, insurance companies identify the practice when a car is registered to the parents' address in say, Manchester, but the car seems to spend most of its time in Leeds, where a child may be studying at university.

The industry is warning that it is an extremely risky practice.

"The view that motor insurance fronting is harmless and does not hurt anyone could not be further from the truth," said Tim Franklin, of Co-operative Financial Services.

"Parents who believe they are helping their children to save money by fronting are not only risking prosecution, but harming their chances of obtaining insurance in the future."

Costs
Tom Dunn is a 17-year-old who is learning to drive in Milton Keynes.

But that could be the closest he ever gets to owning a car for himself, because he acknowledges that he cannot afford to pay for the insurance.

"I think I would be able to buy a second-hand car, but I do not think I would ever be able to buy the car and pay for the insurance," he said.

In a test to see how much Tom would have to pay to insure the car he is learning in - a Vauxhall Corsa - the cheapest was £4,000. That was assuming the car was kept on a private driveway.

Some parents are trying to reduce such costs by any means they think is legal.

Tom's driving instructor, Bryan Greenall, said he was seeing more and more parents who are tempted to break the law by fronting their car insurance.

"I basically tell them to make sure everything is above board and legal. You do not want to be going down the route of something that is not legal, even though you do not know it is not legal," he said.

Premiums
At the Motor Insurers' Bureau - set up to compensate victims of uninsured drivers - they insist the high cost of insurance should never justify lying on an application form.

Fronting could leave parents looking over their shoulder
They say the premiums being charged are not excessive.

"Yes, £4,000 is an awful lot of money but it accurately reflects the risk posed by young drivers," said Ashton West, the bureau's chief executive.

Mr West is keen to stress that fronting was an attempt to obtain money by deception, and therefore amounted to stealing.

And it was not just a criminal record parents could be saddled with. Insurers could refuse cover, and deny insurance in the future.

"If you cause injury to a third party, you will have to pick up their costs as well," said Mr West.

"That could be hundreds of thousands of pounds, and those consequences could stick with you for the rest of your life."

To see for ourselves whether parents were aware of the illegality of fronting, the BBC spoke to some as they parked up in the centre of Milton Keynes.
By Brian Milligan
Business reporter, BBC News
Within the space of 15 minutes, we spoke to three parents who told us they would be perfectly happy to put themselves as the main driver on a policy, even when it was not true.

"Anything that saves money is a good idea," one woman said.

When asked whether she knew it was illegal, she said, "I had no idea."

Another woman admitted to actually having fronted in the past.

But she too was unaware of the illegality, or of the consequences.

The survey says hard times may be forcing parents to try and save money on insurance. But it warns that if they do so illegally, the ultimate price could be prosecution.

Posted by Joe Martin providing business services for small businesses and the self employed. Go to http://www.joemartin.co.uk