Monthly Archives: June 2011

Government to proceed with pension age reform

The Government is to proceed with its plans to raise the state pension age for women from 60 to 65, despite cross-party opposition on the matter.

Earlier this week, MPs voted to give a second reading to the Pensions Bill by 302 votes to 232.

Under the Bill, the state pension age for women will now rise to 65 by November 2018 to equal that for men, before increasing to 66 for both sexes by 2020.

In 2007, the previous Labour Government followed the recommendations of Lord Turner’s Pensions Commission and agreed to achieve equalisation by April 2020.

However, the Coalition accelerated the plan on the grounds that people are living longer and state pension costs have become unsustainable at their current levels.

Speaking during a Commons debate on the issue, Work and Pensions Secretary Iain Duncan Smith, said: “Responsible government is not always easy government. It involves commitment, tough decisions and a willingness to stay the course.

“We will not change from that, we will stay the course. We will secure our children’s future. I recognise we need to implement this fairly and manage the transition smoothly.”

He conceded that a ‘relatively small number of women’ would be particularly affected by the changes, before adding that he was ‘willing to work to get this transition right’.

Yet Ros Altmann, director general of the over-50s organisation Saga, warned that the Government could face a legal challenge if the Bill remains unaltered.

“Ministers must listen to reason on this issue,’ she said. ‘The current plans are unfair and may, indeed, be illegal in public law terms, since they clearly do not give women adequate notice.”

HMRC warns of tax credit email scams

HMRC has warned of a surge in the number of ‘phishing’ e-mails from fraudsters, ahead of the 31 July deadline for people to submit their tax credit renewal forms.

More than 46,000 fake e-mails have been reported to HMRC since the first tax credit renewal forms were sent out at the beginning of April, and some 150 scam websites have been closed down.

In a typical scam, an e-mail is sent suggesting the recipient is due a refund, and asking them to click on a link that directs them to a clone of the official HMRC website.

Victims are instructed to enter their debit or credit card details, after which the fraudsters can access their accounts and sell on personal details.

Joan Wood, director of HMRC online and digital, said: “We currently only ever contact customers who are due a tax refund in writing by post. We do not use telephone calls, e-mails or external companies in these circumstances.”

People are advised not to open any suspicious e-mails, but instead to forward them on to HMRC’s phishing reporting address at phishing@hmrc.gsi.gov.uk before deleting them.

HMRC to target e-traders in new tax campaign

HM Revenue and Customs (HMRC) is to launch a series of new campaigns to tackle tax avoidance, it has announced.

One of the campaigns will target those who use e-marketplace sites such as e-Bay and Amazon to buy and sell goods as a trade or business.

While occasional sellers are unlikely to be liable to tax, people earning a living as self-employed traders may need to pay income tax, national insurance and VAT.

Meanwhile, private tutors and coaches who are able to earn either a main or secondary income from their expertise will be the subject of a separate campaign to recoup unpaid tax.

HMRC said it will also build on its plumbers’ campaign and ‘give an opportunity to another group of tradespeople to come forward and declare unpaid tax’.

It confirmed that it would be using ‘cutting-edge tools’ including a ‘web robot’ to search the internet and find targeted information about specified people and companies.

“By being open about our areas of interest for the coming year we hope to maximise that exchange of information and ensure we reduce the tax gap and help customers pay what they owe,” commented Mike Wells, HMRC’s Director of Risk and Intelligence.

Meanwhile Gary Ashford, of the Chartered Institute of Taxation (CIOT), said: “The news last week that HMRC have launched 16 criminal investigations off the back of earlier campaigns shows that the taxman is taking a very tough line against suspected tax evaders.

“It will be important for HMRC to explain to e-traders the borderline between an individual selling one’s own surplus belongings and moving into trading,” he added.

Banks and businesses ‘must unite to stimulate economic growth’

A leading business group has called on banks and businesses to come together and rebuild the economy and stimulate economic growth.

Addressing the Better Business Finance event in Manchester, the Chief Executive of the Forum of Private Business (FPB) said the time for ‘bashing and blaming’ had passed.

Mr Orford urged company owners and representatives from the banking industry to move on from past mistakes and find ‘common ground’ to help boost the UK’s economic recovery.

“Surely the time has come to acknowledge the issues and to find ways to move forward, constructively and collaboratively,” he said.

“Forget the bashing and the blaming. We are talking about enabling or disabling our recovery – it’s now that serious. Businesses and the banks need to take a critical inward look and accept that the days of easy credit have gone.”

With many firms still struggling to gain access to affordable finance, Mr Orford highlighted the need for small businesses to implement a range of measures to improve their creditworthiness.

These measures included offering assets such as security, methodically preparing business plans and managing both business and personal credit ratings.

However, he told bank representatives that they had a ‘duty’ to reach out to small businesses and urged them to halt the closure of local banks and improve their product offering.

“We need to see new products for business that are relevant for our time,” he said. “Flexible products – maybe even bundled products – which allow borrowers to switch around for use at the appropriate time. Technological advances must enable faster process at reduced cost to business – particularly for the smallest – and I would cite faster payments as an example.”

Money laundering changes ‘to reduce burden on business’

The Treasury has published its recommendations for improving the Money Laundering Regulations and reducing the burden on British businesses.

It follows a Government review of the rules in which ministers found that the regulations and their implementation are ‘broadly effective and proportionate,’ although they conceded that there was scope for ‘improvement’.

Under the Treasury’s proposals for reform, businesses with turnover of less than £13,000 excluding VAT would be excluded from the regulations.

The Treasury also proposes removing more than two dozen criminal penalties for businesses which fail to have the appropriate systems and controls in place to combat money laundering.

It claims this would allow businesses to ‘implement a fully risk-based approach’, where businesses make their own assessment of the risks they face and implement appropriate systems and controls.

Civil penalties will remain and the Government will be consulting on whether regulators should have the power to impose additional penalties.

In a statement, James Sassoon, commercial secretary to the Treasury, said: “We believe that we can make the regulations more effective and proportionate by removing a range of criminal penalties on all businesses and by lifting the burdens on the smallest businesses.

“This will modestly reduce the burden on business, without damaging the fight against money laundering”.

New advisory fuel rates are issued

HM Revenue & Customs (HMRC) has published new advisory fuel rates, which apply to all relevant journeys made on or after 1 June 2011.

However, for one month from the date of change, employers may choose to use the previous rates or the new current rates.

The rates are usually revised biannually, although HMRC has confirmed that it will now review the rates at the beginning of each calendar quarter – on 1 March, 1 June, 1 September and 1 December.

In view of this, it will no longer consider making changes if fuel prices fluctuate by 5% from the published rates.

As widely anticipated, there is now a new band for diesel cars which caters for vehicles with engines up to and including 1,600cc.

The advisory fuel rates are accepted either for employers reimbursing employees for the cost of fuel for business mileage, or for employees reimbursing employers for the cost of fuel for private mileage.

Employers are not obliged to reimburse their employees at the advisory rates, as long as any alternative rates can be justified, for example using a higher rate per mile where an employee uses a four-wheel drive vehicle in the performances of his or her duties.

The new rates can be viewed on the HMRC website.

Cutting NICs ‘would boost small business employment’

Reducing national insurance contributions (NICs) would encourage small firms to take on more staff, a leading business group has said.

In a new study by the Federation of Small Businesses (FSB), nearly a third (31%) of respondents said that cutting NIC payments for the first six months of employment would provide the incentive they need to boost their employee intake.

11% said that extending the NICs holiday scheme would also increase the likelihood of them hiring new members of staff.

The NICs holiday was launched on 6 September 2010 and provides new businesses in certain areas of the country with a break from paying employer NICs in respect of the first 10 employees that they take on in the first year of business.

However, the FSB claims that this does not go far enough and is calling on the Government to extend the NICs holiday to existing firms with up to four members of staff that take on up to three new employees.

Last month the Exchequer secretary revealed that fewer than 3,000 employers had taken up the scheme from 6 September 2010 to 28 March 2011.

Commenting, FSB National Chairman John Walker said: “We have been saying for some time that small businesses would be encouraged to take on staff if National Insurance Contributions were reduced.

“Small businesses want to employ but have told us that they need incentives to do so. The Government must extend the National Insurance Contributions holiday to existing businesses if small firms are to take on new staff and so help tackle high unemployment”.

 

Warning over red tape challenge response

The Business Secretary Vince Cable has warned that Government plans to reduce red tape for businesses may be compromised amid growing concern from the public.

Speaking in Westminster last week, Cable claimed that members of the public and consumer groups were using the new Red Tape Challenge website to lobby for existing regulations to be maintained or increased.

Launched in April, the site gives firms and the public a chance to have their say on regulations affecting their business or lives.

The campaign forms part of the Government’s wider strategy to tackle excessive regulation and thus give businesses the freedom to innovate and grow.

However, the Prime Minister David Cameron may be forced to review his pledge to cut red tape if there is a lack of support for the deregulation plans.

“One of our top priorities is to reduce that amount of regulation that small companies and start-ups face, but please don’t pretend this is easy,” said Cable.

Pointing to the Red Tape Challenge website, he added: “Very perversely we are being bombarded by messages from the public saying please increase regulation.”

Last month the Chancellor George Osborne told the Institute of Directors’ annual conference: “There are lots of people who will oppose this, lots of pressure groups. We really need the people who make the arguments – that we need growth, we need expansion, we need new businesses, we need new business premises – to make sure they are heard. Otherwise it is Government alone defending itself against those pressure groups.”

Once online debate has closed, ministers will have three months to explain why a regulation was still required or it will be scrapped.

Lending under finance guarantee scheme plummets

Lending under the Enterprise Finance Guarantee scheme (EFG) has fallen to a new low, latest figures reveal.

According to a new study by specialist bank Aldermore, the value of loans offered under the Government’s flagship initiative dropped by 11% in the first three months of 2011.

It found that £92 million of loans were offered under the EFG during this period – down from £103 million in the final quarter of 2010.

The bank said this meant lending under the EFG scheme has plunged by 36% in two years.

Launched in 2009, the EFG facilitates additional bank lending to viable SMEs which are unable to secure a normal commercial loan.

Under the scheme, which is set to continue until 2014/15, the Government guarantees part of the loan, reducing the risk of losses for the lender.

Commenting on the findings, Aldermore Chief Executive, Phillip Monks, said: “Lending through the EFG is now less than half of what it was at the peak.

“If small and medium-sized businesses cannot get funding the UK’s economic recovery is not going to be sustainable.”

UK’s ‘ostrich generation’ is failing to plan for retirement

A new report suggests that only 39% of Britons have a financial plan to save for their retirement, even though a majority expect work pensions to become less generous.

The HSBC survey, which quizzed 17,000 people in 17 countries, found that virtually half of those asked in the UK thought they would be worse off in their old age than their parents (compared to just 27% who thought they would be better off). 68% of respondents are worried about coping financially and 48% fear they are not saving enough for their retirement, rising to 57% among women in their 30s and 40s.

Despite this, nearly one in five UK respondents said they didn’t know what their main source of retirement income would be, with a further 21% saying they will rely on the state pension.

The National Association of Pension Funds said: ‘We must begin to think differently about the way we approach financial planning for retirement. The report suggests that Britons currently have a culture of dependency on the state, which is a false economy. People have to take greater personal responsibility for their retirement and rely less on the state, by planning more effectively and saving more for themselves.’

The 39% of Britons who claimed they did have a financial plan for retirement compares with 84% of people in Malaysia.

“The emergence of this ostrich generation is a real concern. Britons know that they need to plan and save more for their retirement, yet they are not turning this knowledge into action,” said David Wells, head of investments, pensions and savings at HSBC.