Monthly Archives: August 2011

Small firms could benefit from simpler reporting requirements

Up to five million small businesses could benefit from simplified reporting requirements if Government plans are given the go-ahead.

The Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC) have published a discussion paper outlining proposals to ease the corporate reporting procedures for micro-entities.

Under the plans, the smallest businesses would only be required to file a simplified Trading Statement (in place of the current Profit and Loss account), a simplified Statement of Position and a simplified Annual Return.

The paper – ‘Simpler Reporting for Smaller Businesses’ – also includes proposals to develop an integrated software package to help firms prepare financial information and plan for the future.

Ed Davey, the minister responsible for corporate governance, said: “Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow, which ultimately benefits the entire economy and is absolutely central to the Coalition’s vision for Britain.

“A new deregulation from EU rules targeted at micro-businesses means we now have a chance to deliver these benefits. The financial reporting regime must also serve the users of the information published by companies, whether they are customers, banks or government agencies. So we look forward to receiving responses to our proposals from a broad range of interested parties in the coming months”.

Those wishing to respond to the paper must do so by 30 October 2011.

Cheque payments need to be improved, say MPs

A Committee of MPs has called for improvements to be made to cheques, including reducing the ‘delays and uncertainty’ surrounding cheque payments.

In a new report, the Treasury Select Committee criticised the Payments Council’s decision to abolish cheques by 2018, adding that banks and building societies should not be responsible for deciding the future of cheques.

“The Payments Council is an industry-dominated body with no effective public accountability,” said committee chairman Andrew Tyrie.

“It should not have unfettered power to take decisions on matters, such as the future of cheques, or other issues, that are of vital importance to millions of people. This is why we have recommended that the council be brought within the formal regulatory system.”

In 2009 the Payments Council set out proposals to end the use of cheques by 2018 after reporting a dramatic decline in the number of people using this payment method.

However, it was forced to revoke its plans earlier this year following fierce opposition from the public and charitable organisations.

In its recent report, the Treasury Committee said the proposed abolition of cheques highlighted the lack of transparency in retail banking.

As part of its recommendations for improvement, the Committee called on the banks to write to customers stating that cheques will be in use for the foreseeable future.

It also called for an overhaul of the board members of the Payments Council, including greater powers of veto for the independent members, and a rethink of the abolition of the cheque guarantee card.

Cameron pledges to support business as latest enterprise zones revealed

The Government has announced the locations of 11 new enterprise zones in England in a bid to boost local economies.

It is hoped the new sites, which will benefit from cheaper business rates, superfast broadband and lower levels of planning control, will create 30,000 new jobs by 2015.

Plans to create 21 new enterprise zones nationwide were first unveiled in the Chancellor’s Budget in March.

The enterprise zones previously announced were: Leeds, Sheffield, Birmingham, Bristol, Liverpool, London, Manchester, Derby, Nottingham, the Black Country, the Tees Valley, the West of England and the North East.

Now Warrington, Cornwall, Gosport, Norfolk, Hereford, Kent and Oxfordshire, Essex, Suffolk, Northampton, Leicestershire, Cambridgeshire and Humber Estuary will also become targeted zones for enrichment.

The Prime Minister David Cameron said: “We are determined to do everything we can to make Britain the best place in the world to start and grow a business.

“Enterprise zones are a major step towards delivering this – cutting business taxes, easing planning restrictions and giving business the tools they need to invest and expand.

“These new enterprise zones will be trailblazers for growth, jobs and prosperity throughout the country.”

Government closes capital allowances loophole

The Government has brought forward the closure of a loophole which allowed businesses to accelerate capital allowances claims for plant and machinery and obtain advantageous early tax relief.

With the capital allowances annual investment allowance (AIA) due to fall from £100,000 to £25,000 next year, HMRC said it was aware of a scheme to ‘side step’ the anti-avoidance rules.

It claims that the scale of the tax potentially put at risk by the scheme is such that it has decided to close the loophole with immediate effect.

The closure of the loophole, which was originally proposed for April 2012, will now have effect for expenditure incurred on or after 12 August 2011.

Announcing the move, the Economic Secretary to the Treasury, Justine Greening said: “The Government is determined to reduce tax avoidance in order to protect the Exchequer, which provides funding for public services, and maintain fairness for the taxpayer.

“By ending this loophole today we will preserve important revenue while maintaining a ‘fair system of capital allowances to support business investment.”

As announced in last year’s Emergency Budget, the capital allowances regime will undergo major reform from April 2012.

The AIA, which offers tax relief at 100% on qualifying expenditure in the year of purchase, will be significantly reduced to £25,000, while the rates of writing down allowance are also set to fall.

The WDA rates for new and unrelieved expenditure on plant and machinery will be reduced from 20% to 18% per annum for expenditure allocated to the main rate pool, and from 10% to 8% per annum for expenditure allocated to the special rate pool.

HMRC proposes to move more VAT filing online

HM Revenue and Customs has launched a consultation on the next steps for moving VAT online.

It proposes that from 1 April 2012, it will be compulsory for VAT registered businesses with a turnover below £100,000 to file VAT returns online and make electronic payment of any VAT due.

There are also plans to make online the default (though not compulsory) channel for all businesses for VAT registration, deregistration and changes to registered details.

Since 2010, larger businesses and all new VAT registrations have had to file VAT returns online and pay their VAT electronically. Others can still file paper returns and pay by cheque.

Although HMRC claims that moving to online filing has so far been ‘considerably faster’ than predicted, with ‘few practical problems’, for some older businesses and some in rural locations where broadband is limited, compulsory online filing could be a burden.

The move is part of a wider general Government drive to move transactions from paper to online. There are plans to introduce a new online VAT registration service from October 2012, with the aim of making registering quicker and easier, and there are also consultations to move direct taxes online.

The consultation on the VAT proposal closes on 31 October 2011.

Chancellor confirms 50p tax rate ‘under review’

The Chancellor George Osborne has confirmed that HMRC is reviewing the 50% top rate of income tax, fuelling speculation that the rate will be scrapped next year.

Speaking on BBC Radio 4’s Today programme, Osborne signalled that the 50p tax rate, which was introduced by the previous Labour government, may be a temporary measure.

“I’ve said with the 50p rate I don’t see that as a lasting tax rate for Britain because it’s very uncompetitive internationally, and people frankly can move,” he said. “What is it actually raising? It’s only been in operation for a year this tax, put in place by the last government”.

HMRC will now examine its data to assess whether or not the 50p tax rate is generating money. However, the figures will not be known until at least the end of the tax year next April.

“Since people don’t send their self-assessment forms back until the end of the year we won’t be able to get that assessment until the end of the year or more likely the beginning of next year, but we are going to do that assessment,” he added.

The move follows calls from business leaders to scrap the top tax rate in order to boost UK enterprise. Many politicians also believe the rate is driving business away from the UK and penalises entrepreneurs.

The 50p income tax rate was introduced in April 2010 and affects those earning over £150,000.

No rate rise until 2012, predict economists

It is unlikely that interest rates will rise before next year, according to some of the country’s leading economists.

In a poll carried out by the BBC, 26 of the 35 economists surveyed said they did not expect interest rates to rise this year, and more than half predicted that rates would reach 1.5% by the end of 2012.

12 economists said they expect rates to first go up in the first quarter of 2012, while six anticipate that rates will rise in the final quarter of this year. Three forecasters believe that rates will remain unchanged until 2013.

The poll was published ahead of the Bank of England’s latest announcement on interest rates on 4 August.

UK interest rates have remained unchanged at 0.5% for over two years, providing a welcome reprieve to many home owners with tracker mortgages.

However, the historically low rate has hit savers hard and prompted calls for the Bank of England to raise rates in the coming months.

Minutes from last month’s meeting revealed that the Bank of England’s Monetary Policy Committee voted seven to two in favour of holding rates at 0.5%.

 

Pensions system in ‘urgent need of reform’

The UK pensions system is in ‘urgent need of reform’ after it emerged that some 14 million people do not have a workplace pension.

According to a recent review by Lord McFall, the former chairman of the House of Commons’ Treasury Committee, millions of people are facing a ‘bleak old age’ due to ‘critical problems’ with pensions in private firms.

Commissioned by the National Association of Pension Funds (NAPF), the review also found that employees in workplace pension schemes are often overcharged for a service that is ‘complicated’ and ‘inefficient’.

“Too many people are stuck in a complex, costly and inefficient system that relegates the consumer’s interest to second place. On top of that, they simply are not saving enough to secure a decent retirement,’ said Lord McFall.

“People need to get more bang for their buck or they are not going to bother with a pension. Instead, they will end up spending today, ignoring tomorrow and scraping by in poverty on the state pension. The complacency of many in the pensions industry is alarming.”

Starting from 2012, employers will be required to automatically enrol eligible workers into a qualifying pension scheme and pay a minimum contribution into the fund. Employees will also be required to contribute to the scheme.

However, the review said the government should consider increasing the minimum amount that is contributed by these workers.

Pensions Minister Steve Webb described the report as ‘a wakeup call’, while Age UK ‘warmly welcomed’ the review.

“Government action is critical now to ensure those with small pension pots do not lose out any longer,” said charity director Michelle Mitchell.

Capital allowances ‘too complicated’ for small businesses

Tax breaks designed to encourage businesses to invest in new equipment are overly complex and fail to boost spending, a new study suggests.

Research for the Open University has found that just 8% of firms understand the rules regarding capital allowances, while 19% rated them ‘acceptable’.

A further 31% of those surveyed said the system was ‘too complicated’ and 42% didn’t know what they were and/or left it to their advisers.

The study was conducted by the Finance & Leasing Association (FLA) as part of the Open University’s Quarterly Survey of Small Business in Britain.

Under the capital allowances system companies can write off some of their purchase of equipment against their taxable profits.

Currently, the first £100,000 of the year’s investment in plant and machinery, except for cars, is allowed at 100%. However, the maximum annual investment allowance is set to fall to £25,000 with effect from April 2012.

Following the findings, Julian Rose, head of asset finance at the FLA, called on the Government to simplify the current system of capital allowances.

“If small firms are to drive the economic recovery, they need tax investment incentives that are simple to claim,’ he said. ‘The capital allowances system is over-complicated and falls short of providing the support that UK businesses need to encourage them to invest.”

HMRC apologises for ‘poor performance’

HMRC has apologised to taxpayers after a new report exposed a raft of problems with its services.

The chairman of HMRC, Mike Clasper, admitted that the Revenue was ‘not happy’ with its performance in 2010, adding that it had been ‘overwhelmed for a period of time’.

It follows a report by the Treasury Select Committee which highlighted numerous problems with the department, including ‘endemic’ delays in answering letters and failing to answer phone calls.

“[Our performance] simply wasn’t good enough on post and telephone and I’d like to take the opportunity to apologise to the people who had to take a long time to get through, or we didn’t get back to them quick enough with the post,” said Clasper.

He continued: “In 2011 we’ve been working very very hard to improve things. We’re handling the calls immediately much more frequently than we did in 2010 and as far as individual customers are concerned you know the post levels have dropped in half.”

The MPs’ report blamed bad management, excessive job cuts, demoralised staff and increasingly complex tax laws for HMRC’s unsatisfactory level of service.

“The evidence we have received in this inquiry has been disturbing,” commented MPs. ‘HMRC’s delivery of services to the general public has fallen to unacceptable levels in several areas.

“We are concerned that HMRC’s performance will continue to deteriorate if further reductions in resources are badly managed.”

HMRC said it has now recruited an additional 1,000 contact centre advisers to handle calls during ‘exceptionally busy periods’.