|
|
| Quick Links New Businesses Business Development Business Management Annual Accountancy Taxation Financial AdvisersUseful Dates Key Dates & Deadlines Tax Calendar 2008/09 Subscribe to our Newsletter |
Newsletter - April 2008In this edition:
Chancellor unveils concessionary tax deal Government plans to compensate those adversely affected by the recent abolition of the 10p rate of income tax, have been described as a ‘climb-down' by opposition parties. In a letter to the chairman of the Commons Treasury committee, Chancellor Alistair Darling pledged to review the national minimum wage, tax credits and the Winter fuel payments system to help lower earners. The concessionary deal, which is to be backdated to the beginning of the financial year, comes in the wake of fierce criticism from Labour MPs and growing concerns of a backbench rebellion. Despite being accused of making a ‘u-turn' and ‘panicking' by Conservative leader David Cameron, Gordon Brown insisted that he has made ‘the right long-term decisions.' Earlier this month the 10p starting rate of income tax was scrapped, meaning that those who earn less than £18,000 per year and are ineligible for working tax credit would be financially worse off. While the Prime Minister admitted that the proposed compensatory package would not help everyone affected by the tax changes, the Trades Union Congress (TUC) has welcomed the latest move. Responding to Darling's statement, Brendan Barber, TUC General Secretary, said: ‘The Chancellor has been right to listen to MPs and unions who have said that the abolition of the 10p tax has hit the poor. ‘Let us hope that [this ...] signals the start of a new commitment to a progressive tax system and the relief of poverty.'
Commission calls for supermarket ‘shake-up' Measures designed to boost competitiveness in the grocery sector and improve consumer choice have been unveiled by the industry watchdog. Proposed changes include the introduction of a new ‘competition test' that would be applied when making planning decisions for larger stores. Action will also be taken to prevent land agreements restricting competitors from entering the market. The recommendations follow a two-year probe by the Competition Commission into concerns that supermarkets hold an unfair monopoly in many UK towns, consequently forcing smaller stores out of business. ‘Although, in many areas, there is good choice and strong competition between retailers, there are also a significant number of local areas where larger grocery stores face limited competition and local shoppers lose out,' the report said. The reformed code of practice, which will apply to grocery retailers with a turnover of more than £1 billion, is to be regulated by a new supermarket ombudsman. The ombudsman will resolve complaints made by suppliers against supermarkets and, according to the Competition Commission, should have the power to ‘levy significant financial penalties' on retailers that do not comply with their findings.
Court backs OFT over ‘unfair' bank charges A High Court judge has ruled in favour of the Office of Fair Trading (OFT) and against Britain 's biggest banks in a dispute over ‘unfair' overdraft charges. Mr Justice Andrew Smith has authorised the OFT to decide whether unlawful overdraft penalties levied on bank customers are subject to ‘unfair contract' rules. The highly complex test case follows a flood of complaints from bank customers who have been trying to reclaim the charges, arguing that the fines are too high. Some experts predict that banks have made between £2bn and £3.5bn a year in overdraft fees in the last six years. Once the final outcome is reached, banks and building societies may be forced to pay billions of pounds back to those customers affected. The OFT has described the judgement as an ‘important early milestone' for its investigation into an area of ‘high consumer interest.' However, Angela Knight from the British Bankers' Association, emphasised that the case is still in its early stages: ‘We need to take what the judge has said very carefully and not jump to conclusions. This is the start of a process,' she said. Business group seeks to raise profile of corporation tax debate The business community has urged MPs to give criticisms of the recent rise in small firms' corporation tax the same weighting as public concern over the abolition of the 10% starting rate of personal income tax. The Forum of Private Business (FPB) believes that politicians should dedicate the same level of attention to the increase in the lower rate of corporation tax, which has risen from 19% to 21% in the last 12 months. The lower rate is scheduled to inflate to 22% in April 2009 while the higher rate, which is paid by larger firms, is being cut from 30% to 28%. ‘It is not only lower-income individuals who are being adversely affected by this Government's tax regime,' said the FPB's Chief Executive, Phil Orford. ‘It is understandable that media coverage has highlighted the burdens for individuals, however, the wellbeing of smaller UK businesses is also being seriously undermined, and all MPs should be aware that their business constituents are also being subjected to an unfair taxation policy.' Indeed in a survey conducted by the FPB, 67% of respondents said they would be more likely to reinvest in their business if plans to increase small firms' corporation tax were scrapped. Meanwhile, 49% of those quizzed claimed the reversal of the controversial tax hike would give them extra funds to invest in skills and training, and 47% said they would be more likely to seek to grow their businesses.
Consumers ‘swap credit cards for cash' Consumers are choosing to pay with cash rather than credit cards in an effort to rein in their finances, a recent study by the British Retail Consortium (BRC) has suggested. In a survey of 17,000 shops it was revealed that cash had been used for 60% of transactions carried out last year – up from 54% in 2006. BRC Director General, Stephen Robertson, said cash was ‘alive and thriving,' with an increasing number of shoppers choosing to curb the outgoings on their credit cards. ‘Hard-up customers are increasingly reluctant to spend money they haven't actually got in their hands,' he said. ‘While total retail spending continues to grow, there is a widening gap between the amount spent in cash and the amount spent using cards, suggesting customers want to keep tight control of their finances.' The BRC report also urged credit card companies to reduce the charges they impose on retailers, revealing that a £20 transaction would cost the retailer four times more if paid with a credit card rather than cash.
Small business profits ‘hit by rogue sales tactics' A large number of small firms believe their profits are suffering as a result of unfair selling practices employed by their competitors, according to a new study. Research carried out by the Department for Business, Enterprise and Regulatory Reform reveals that 53% of business leaders think their bottom line has been dented by rogue sales techniques used by rival firms. Of those affected, one in ten estimate that such unethical tactics are costing their business more than one fifth of its revenue. The Government has now outlined plans to implement legislation to address the is sue and appease the growing concerns of the small business community. Subject to Parliamentary approval, the Consumer Protection Regulations (CPRs) will see 31 types of unfair selling methods, such as prize draw scams and aggressive doorstep selling, outlawed from 26 May 2008. John Wright, Chairman of the Federation of Small Businesses, has welcomed the new law. ‘Legitimate businesses should no longer have to face unfair competition from firms who use underhand tactics to get ahead,' he said. ‘These regulations will create a level playing field for all, allowing businesses to thrive based on merit and not on who is best at duping or pressuring consumers.'
Business welcomes interest rate cut Business groups have applauded the Bank of England's decision to cut interest rates from 5.25% to 5%, amid growing concerns over the volatile financial and economic climate. The rate reduction, which was widely anticipated by analysts, means that UK interest rates have now been revised on three occasions since early December. The central bank hopes the latest drop will inject life into the country's ailing economy and boost consumer confidence as the global credit crisis deepens. Richard Lambert, Director-General of the Confederation of British Industry, has welcomed the decision: ‘This cut was badly needed, and will be welcomed by a business world that is feeling the pressures of the credit crunch and of slower growth. ‘Higher interbank and mortgage lending rates are dampening investment, consumer demand and economic activity, and [this] cut should ease conditions a little.' However, the British Chambers of Commerce warns that ‘undue delay in acting threatens to reduce the effectiveness of interest rate cuts' that had already been forecast. Meanwhile, some experts believe the 0.25% rate reduction to be in line with economic forecasts originally set out by the Bank.
The number of profit warnings from UK listed companies in the first three months of 2008 hit the highest level for a first quarter since 2001. According to a survey by a major financial firm, there were 114 profit warnings in the period, 11% up on the same period in 2007 and the most since the end of the ‘dotcom' boom. Retailers faced more warning than any other sector, as consumers cut back on spending in the current climate of mortgage worries, following the ‘credit crunch'. Meanwhile, Shadow Chancellor George Osborne has blamed Gordon Brown for the country's economic difficulties. In a speech to the Policy Exchange think tank he said: "At the root of the problem is the failure of the government's economic policy… [the Prime Minister has] rested his claim to competence on three pillars - stability, prudence and competitiveness. “Instead, after a decade of worldwide growth, we have ended up with housing boom followed by bust, spending followed by debt, and a country finding it more and more difficult to compete.” Following the recent cut in interest rates, Chancellor Alistair Darling urged the banks to pass on the cut to home-owners. "We have been supporting the system - through the Bank of England an extra £15bn has been put in to help them get through this difficult period," he said. "We know this is a difficult time. We've got to get through it and we can get through it. What we are saying is - we are helping the banks, the banks have got to help people as well." Despite all this, an online survey by Harris Interactive suggested that while more than a third of people in the UK expected their financial position to worsen next year, 44% said the credit crunch had so far had "no impact" on their lives.
Pensions provide only ‘modest' income The latest findings from the Office for National Statistics (ONS) suggest that combined state and private pensions still provide most pensioners with only a ‘modest' income. In 2005/06, 62% of pensioner couples had less £10,000 in pension income and half of single pensioners had income from pensions of less than £6,000. Pensioners are also still relying heavily on the state pension. While the average pensioner couple had state pension and benefits worth £7,296, their average income from private pension sources was just £2,115. However, the Department for Work and Pensions (DWP) claims that pensioners are still substantially better off than they were 10 years ago. ONS research from December 2007 shows that pensioner income from all sources outstripped inflation by a third in the decade to 2005/06. "We've lifted more than a million pensioners out of poverty by targeting help to those who need it most. Pension Credit guarantees an income of £124 a week compared with £69 a week in 1997" said a spokeswoman for the DWP. Meanwhile, the Government has given greater powers to the Pensions Regulator to protect pension schemes in companies which are bought up by other specialist forms. The past few years have seen a growing trend for buy-out firms to take over unwanted pension schemes to make a profit for their investors. Now the Regulator will be able to insist that such companies can be forced to make extra contributions to those pension funds if they reduce the level of security.
Businesses to pay ‘extra £4bn' in tax, claims CBI UK businesses will be forced to pay an extra £4.2 billion in tax over the next three years as a result of recent Government changes, the Confederation of British Industry (CBI) has argued. The lobby group claims the loss of plant and machinery investment allowances and the abolishment of empty property relief is largely responsible for the projected ‘tax hike'. Despite a 2p cut in the headline rate of corporation tax, the CBI predicts that UK enterprises will pay an extra £1.84bn in tax in 2008/9, £1.24bn in 2009/10 and £1.13bn in 2010/11. According to the CBI, amends to the discrimination law and rules on consulting employees, which came into effect on 6 April, will also add to the financial pressure incurred by small firms. John Cridland, deputy director-general of the CBI, said: ‘When the economy is slowing, the last thing a Government should do is raise taxes on the part of society which creates jobs and wealth, but that's what's happening. ‘The consequence will be that hard-pressed companies, which are already paying high rates of tax, will find life getting even tougher.' Meanwhile, a spokesperson for the Treasury has insisted that other measures introduced by the Government will help boost British business: ‘The UK's corporation tax rate [has been] cut by 2p to 28p – its lowest ever level, and the lowest of all major industrialised nations – and a new annual investment allowance will be introduced for all UK firms, providing a major incentive for them to expand or improve their business.'
The Government has introduced a new code of conduct in a bid to cut the volume of red tape faced by small businesses. The Regulators' Compliance Code is designed to improve the way regulators work and thus save companies valuable time and money. Under the new system regulators such as the Environment Agency and the Health and Safety Executive, are required to take a risk-based approach to inspection and enforcement. The Government believes this will then reduce the overall number of inspections and minimise unnecessary form filing and information requests. Commenting on the new code of practice, Business and Competitiveness Minister, Shriti Vadera, said: ‘The Compliance Code requires regulators to work better with business and ease the burdens placed on those who operate within the rules. ‘Regulators must take a light-touch approach to companies who comply with the law and target enforcement only at those who benefit by flouting it.' The new rules also enable businesses to challenge regulators through Judicial Review if they do not comply with the Code.
Small firms ‘failing to plan' for the unexpected UK firms are at risk of going out of business due to a lack of planning for unexpected events, according to the Association of British Insurers (ABI). Recent data gathered by the insurance body reveals that seven out of ten small businesses would fold if they experienced a major emergency in their first year of trading. It has also been revealed that two-thirds of firms do not have adequate contingency plans in place to deal with an unexpected disaster, such as a fire or flood. The ABI has now joined forces with the Government to raise awareness of contingency planning amongst Britain's 4.3 million small and medium-sized enterprises. The severe flooding which crippled thousands of businesses last Summer illustrates the need to plan for the unexpected, according to Stephen Haddrill, ABI Director General. Commenting on the publication of a new advisory guide, Pat McFadden, Minister of State for the Department for Business, said: ‘The millions of people who launch, lead and work for small businesses up and down the country create vital jobs, provide essential services and generate significant wealth for the country.' ‘This latest guidance provides vital risk management advice to help ensure our small businesses grow and flourish,' she added. You can view the guide to insuring your business at www.abi.org.uk/SMEGUIDE .
‘Tough' new credit rules come into force The Consumer Credit Act 2006 has seen its biggest shakeup for more than 30 years, with the introduction of a series of new measures that give consumers greater protection against rogue lenders and debt collectors. Under the new rules, which came into effect on 6 April, lenders will be subject to a more rigorous test by the Office of Fair Trading (OFT) in order to receive a Consumer Credit Licence . The recent amendments also grant the OFT greater powers to impose more stringent penalties for licence holders who abuse their position, while the £25,000 threshold above which consumer lending is not regulated has been removed. Secretary of State for Business and Enterprise , John Hutton, said the recent changes would ‘create a level playing field that will enable honest businesses to thrive.' Meanwhile John Fingleton, Chief Executive of the OFT, claimed the new regulations would create a fairer environment for consumers without increasing the red tape burden for small firms. ‘The new provisions will allow us to adopt a more targeted approach to credit licensing based upon risk to consumers,' he said. ‘This will mean we can deal more effectively with behaviour which harms consumers while imposing minimal burdens on businesses that treat consumers well.'
Businesses advised to prepare for Corporate Manslaughter Act Businesses are being urged to review their health and safety policies ahead of changes to the law on corporate manslaughter. On 6 April the Corporate Manslaughter and Homicide Act will come into force, placing greater responsibility on UK firms to ensure they have sufficient health and safety practices in place. Under the Act senior officials can be held responsible for fatal accidents that occur as a result of defective management practices. To secure a conviction the prosecution must prove that the management failure amounted to a ‘gross breach' of the duty of care owed to the deceased. The jury will also need to ascertain whether ‘reasonable steps' were taken to protect the health and safety of those at risk. Those firms deemed liable may incur an unlimited fine, along with a possible publicity order which permits the exposure of the offence details to the wider public. A court may also instruct an organisation to make changes to remedy the failures behind the death. ‘This new legislation means that failure to manage and monitor their procedures could lead to a heavy fine and public humiliation,' said Phil Orford, Chief Executive of the Forum of Private Business. ‘It is vital that smaller firms undertake a full review of their systems and processes to create and enforce strict health and safety procedures.' UK retailers ‘failing to comply' with online selling regulations A substantial number of UK businesses that sell goods over the internet are failing to comply with key legislation, according to new research. Random spot checks carried out by the Office of Fair Trading (OFT) and Trading Standards reveal that 40% of online retailers surveyed did not inform consumers of hidden charges that were added to their final bill – a legal requirement under the Distance Selling and Electronic Commerce Regulations. The study, which examined 530 UK-based websites, also found that 15% of sites did not comply with the requirement that gives shoppers details of their right to cancel their order within seven working days. Meanwhile, 31% of sites flouted legislation which entitles consumers to a full refund for their goods. Commenting on the results, a spokesperson for the OFT said: ‘We encourage all online retailers to check their sites to ensure that they comply with regulations, so that shoppers can be confident that their rights are respected when they shop online.' UK businesses can find help and advice on distance selling at:
Get ready for new regulations, businesses warned Smaller firms are being urged to prepare for raft of new regulations that are set to come into force at the end of this week. On 6 April a series of changes affecting businesses across the UK will be implemented as part of the Government's biannual legislation update. Leading lobby groups are now advising enterprises to familiarise themselves with the forthcoming changes to ensure they comply with the relevant revisions. Most notably, the Chancellor's controversial changes to the capital gains tax regime will take effect, with a new flat rate of 18% and the concessionary Entrepreneurs' Relief operational from 6 April. This date will also see an increase in smaller firms' tax contributions, while the higher rate of corporation tax will be cut from 30% to 28% for larger businesses. A number of revisions to the Companies Act 2006 are to also be implemented as part of a Government drive to reduce the burden on private companies. Firms will no longer be forced to appoint a company secretary or have the signatures of two directors to execute deeds. Other reforms coming into effect on 6 April include measures that will give both consumers and agency workers greater protection against exploitation. The test to define harassment will also be amended under changes to the Sex Discrimination Act, while employers will soon be held liable for the sexual harassment of staff by third parties. |
Latest News Business Online Summer 2008 Year-End Strategy Guide Winter 2007 Autumn 2007 Summer 2007 Spring 2007Information Centre 2008/09 Tax Library Budget Report Useful Links Ask Jays |
| ©2008 Jays Chartered Certified Accountants | Company No. 2943017 |