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Newsletter - July 2007In this edition:
Brown's new Government 'must put small firms first' As Gordon Brown leaves behind the position of Chancellor of the Exchequer to take up the reins of power as Britain's new Prime Minister, business groups have called on Brown's new Government to promote the needs of small businesses. A recent study conducted by the Forum of Private Business (FPB) has suggested that the top priority for many small business owners is cutting the tax burden. 91% of respondents called for a reduction in employers' national insurance contributions, while 63% wanted to see a reversal of the increase in corporation tax from 19% to 22%. Meanwhile, reducing red tape was also a key priority for respondents, with 85% calling for the administration of PAYE and national insurance to be integrated, and 60% calling for a mechanism to monitor the Government's red tape agenda. Other issues raised by the survey include eliminating unfair competition, improving skills and training, and promoting investment. Rebecca Leavers, Research Manager at the FPB, called on the next Chancellor to put the needs of the UK's small firms first, saying, 'There are more than four million smaller companies in the UK, employing over half the private sector workforce. They are an integral part of the economy and whoever succeeds Gordon Brown as Chancellor must put them at the forefront of policy'. Business responds to new EU treaty The UK's business groups have given a mixed reaction to the new EU treaty, which was recently agreed between European leaders in Brussels. Under the new deal, Britain has the right to opt out of the Charter of Fundamental Rights, and will retain its independence on foreign policy and tax and benefits. However, the British Chambers of Commerce (BCC) has expressed concerns over the decision to remove the reference to 'free and undistorted competition' from the treaty. The Confederation of British Industry (CBI) has welcomed the news of the opt-out from human rights charter, but has expressed similar concerns over the issue of free competition. John Cridland, CBI Deputy Director-General, said, 'We welcome the Government's success in securing what appear clear opt-outs from the Charter of Fundamental Rights in the areas that could have damaged the UK's flexible labour market'. 'However, despite the addition of a protocol restating a commitment to undistorted competition, we remain concerned that the removal of this reference from the EU's objectives strengthens the hand of protectionist elements within Europe.' Tony Blair has insisted that the new treaty does not cross any of Britain's so-called 'red lines', rejecting calls from opposition leader George Cameron for a UK referendum on the issue. Workplace smoking ban extends to whole of UK As the ban on smoking in all workplaces in England approaches, the Federation of Small Businesses (FSB) has published advice aimed at helping small firms to prepare for the new regulations. From 1 July 2007, smoking is banned in virtually all enclosed workplaces and public places in England, with a limited number of exceptions. The new rules follow the introduction of similar legislation in Scotland, Wales and Northern Ireland earlier this year. Under the Smoke-free (Premises and Enforcement) Regulations 2006, all enclosed or substantially enclosed public places and workplaces – including vehicles which are used for business purposes – become 'smoke-free' environments. Three new criminal offences now apply, in respect of: failing to display the required no-smoking signs; failing to enforce the no-smoking rules; and smoking in a prohibited area. Mary Boughton of the FSB said, 'If a small business gets the details wrong it could prove very costly. The fines for an individual are very small but for a business they can run into thousands of pounds'. Employers are advised to ensure that they have in place an appropriate policy on smoking in the workplace, and to consult their employees and legal advisers on any proposed changes to procedures. Speed cameras net Treasury £15 million surplus The Government has admitted that the Treasury received a surplus of more than £15m from speed camera fines in England and Wales during 2005/2006. However, House of Lords Labour spokesman Lord Bassam insisted that the cameras “were not cash driven.” Receipts from fines during the period totalled more than £114.6m, of which some £99.5m was "directly attributed to the prevention, detection and enforcement of offences". The surplus was given to the Treasury. Conservative former minister Lord Trefgarne queried the effectiveness of speed cameras in relation to the money generated in fines. "What contribution will all this have to the maintenance of road safety? Do you think this money is usefully spent in that regard?" he asked. Lord Bassam responded: "In the National Safety Camera Evaluation Report, based on four years' experience and published in December 2005, they found a 42% reduction in the number of people killed or seriously injured at camera sites across the 38 partnership areas [in England and Wales]. That means about 1,745 fewer people killed or seriously injured per annum, including 100 fewer deaths." As part of his significant government overhaul, Prime Minister Gordon Brown has announced a revamping of the Department of Trade and Industry (DTI), which will now be called the Department for Business, Enterprise and Regulatory Reform (DBERR). The Department will be run by ex-pensions secretary John Hutton. The future of the DTI has been uncertain for some time, with many predicting that it could be disbanded altogether. A new Department for Innovation, Universities and Skills will also be created, and will take over responsibility for science and innovation from the former DTI. The Department will be run by John Denham. Gordon Brown is also expected to appoint a business advisory council, headed by high-profile business leaders, which will liaise with the Government. E-waste recycling laws come into effect Regulations that require British producers and importers of electronic goods to be responsible for the recycling of their products have come into force. ‘E-waste’, which includes PCs, games consoles and household appliances such as microwaves and washing machines, is considered to be the fastest-growing form of rubbish in the European Union. The UK produces an estimated 1.2m tonnes of e-waste each year, most of which goes to landfill sites. Under the new Waste Electrical and Electronic Equipment (WEEE) Directive, retailers selling electrical goods are obliged to offer customers a free in-store take-back service on a "like for like" basis, or help fund the expansion of a network of WEEE collection points. The directive also requires manufacturers to join a "Producer Compliance Schemes", monitored by the Environment Agency, which collect and recycle the e-waste on behalf of the companies. The WEEE directive has had a troubled history. It was supposed to be operational by August 2005 but was delayed by "major difficulties". It then entered the statute book at the beginning of 2007, but full producer responsibility was delayed until 1 July.
HMRC plans to take unpaid tax directly from bank accounts Money owed to the taxman could be taken automatically from people’s bank accounts, if proposals made by HMRC officials ever become law. Currently HMRC is required to obtain a court order to seize money owed in unpaid tax, but since about 200,000 people are chased through the courts each year the process is regarded as costly and bureaucratic. The plan would allow HMRC to bypass this requirement. HMRC claims that the new method would be used as a last resort against persistent and serious defaulters. However, critics worry that it would mean HMRC acting as “judge, jury and executioner”. They argue that proper safeguards such as rights of appeal must be put in place for people under suspicion of defaulting on tax. Taxpayers have until the middle of September to respond to a public consultation on the proposals.
‘Inexcusable’ number of companies breaking data protection rules Data protection rules are being ignored or abused by a ‘horrifying’ number of companies and public bodies, according to a report by the UK's Information Commissioner Richard Thomas. The Commissioner received nearly 24,000 enquiries and complaints about personal information issues in 2006/07, and while over half of these required only advice and guidance, a breach of data protection rules was likely to have happened in 35% of cases, of which a further 77% resulted in remedial action. Mr Thomas said of the figures: “Frankly these are inexcusable. None of this is really rocket science.” Internet firms generated the largest number of complaints, followed by banks, direct marketing companies and telecommunications organisations. These included major corporations such as Orange, Barclays and NatWest. A dozen high street banks were guilty of discarding documents containing customers' personal details in unsecured bins outside their premises. There were also complaints about public bodies and governmental organisations, including the Child Support Agency and the Foreign and Commonwealth Office. The Commissioner urged businesses to take data protection seriously. "The roll call of banks, retailers, government departments, public bodies and other organisations which have admitted serious security lapses is frankly horrifying," he said. The Ministry of Justice has suggested that prison sentences could be given to those who deliberately misuse personal data.
Insurance companies consider flood claims The insurance industry is to meet with Government ministers to consider how best to deal with the aftermath of the recent floods in the UK. Prime Minister Gordon Brown has announced a £14m relief package for those affected, while the cost to insurers is expected to be in the region of £1.5bn. The flooding is believed to have affected 31,200 homes and 7,000 businesses, with the Midlands and northern England the hardest hit areas. With many people still currently unable to return to their homes, the Government is calling on insurers to deal with claims promptly. The Association of British Insurers (ABI) said that the meeting would provide an opportunity to update ministers on how the insurance industry has been handling the large number of claims. However, Nick Starling of the ABI commented, 'The problem with flooding is that the damage is very severe, it takes a long time to deal with, it takes a long time for properties to dry out before you can actually start remedying and rebuilding'. Government releases guidance on new holiday entitlement The Department for Business, Enterprise and Regulatory Reform (DBERR) has released new guidance on the forthcoming increase in the statutory holiday entitlement. Under the new regulations, the minimum annual holiday entitlement will be rising to 28 days in England, Scotland and Wales, in two separate phases. The entitlement will increase to 4.8 weeks in October 2007 (the equivalent of 24 days of leave), and to 5.6 weeks on 1 April 2009 (28 days of leave). Payment can be given in lieu of the additional days introduced on 1 October 2007, but from 1 April 2009 payment in lieu cannot be provided for anything less than 5.6 weeks, unless a member of staff is leaving. For staff wishing to carry over unused holiday, this is only allowed for any entitlement above the four week minimum, and additional statutory leave can only be carried over into the following leave year. Part-time workers will be entitled to the same level of holiday pro rata, and staff working six days a week will be entitled to 28 days of leave from 1 October 2007. Small business wins landmark family tax case The landmark tax case involving the family-run IT business Arctic Systems has finally reached a conclusion, with the House of Lords ruling in favour of Geoff and Diana Jones and against HMRC. The case of Jones v Garnett (commonly called “Arctic Systems”), which has been running for several years, has centred on the issue of whether Mr Jones's salary was set at an artificially low level, and whether the dividends received by Mrs Jones should have been treated for income tax purposes as Mr Jones's. There have been many twists and turns, as HMRC, having previously lost a unanimous ruling in the Court of Appeal, appealed to the law lords to tax Geoff Jones on dividends paid to his wife. HMRC had used an old piece of legislation, Section 660, to argue that the dividends paid to one partner were really earned and belonged to the major fee earning partner, a higher rate tax payer. It is a business structure used by thousands of married couples who jointly own a small business. The uncertainty over the case has left thousands of businesses concerned that they too could face large tax demands. In their judgment, read out to a packed chamber this morning, the Lords ruled that: No further appeals are possible under UK law, and it seems that HMRC will now have to review its guidance on settlements and on outright gifts. The opinions of the law lords can be read on the Parliament website: http://www.publications.parliament.uk/pa/ld200607/ldjudgmt/jd070725/jones%20-1.htm We can advise you on all your tax planning needs. Contact us for further assistance - we will be pleased to help you. Credit card debt 'could last for 30 years' One in 10 credit cardholders only pay their credit card debt by the minimum repayment each month – which could leave millions in debt for up to 30 years – according to price comparison website uSwitch.com. The group found that about 3.5 million borrowers only repay the monthly minimum. On average, this is set by the credit card companies at 2.6% of the outstanding balance, but for 35 card providers it is just 2%. uSwitch then calculated that if someone with an average credit card debt of £1,812 repaid their balance at a rate of just 2% a month, it would take 29 years and two months to clear it, and cost them £2,858 in interest. However, increasing repayments to 3% would halve the time taken to repay their debt to just over 15 years and only cost interest of £1,257. A spokesman for the group said: "In an environment of rising interest rates where personal debt in the UK has reached a staggering £1,325bn, consumers could now finish repaying their mortgage before their credit card. Despite the introduction of 'health warnings' on credit card statements, the implications of making the minimum repayment each month are still not clear enough." uSwitch is calling on credit card firms to raise their monthly minimum repayments to at least 3%.
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