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Newsletter - May 2007In this edition:
Small business banking comes under fire Banks must do more to improve their service to UK small businesses, says a new report from the Federation of Small Businesses (FSB). The FSB's review of small business banking surveyed over 4,000 small firms, and found that while services have improved overall, there are a number of key areas where the banks are failing to deliver. Firstly, the business organisation found that switching accounts, overcharging and poor customer service were major areas of concern, with many small business owners reporting that bank staff did not understand their needs. Meanwhile, the report also found that the banks are not fulfilling their commitment to the Competition Commission to offer free banking or pay a minimum 2.5% interest on business current accounts. Mike Cherry of the FSB said, 'The Competition Commission found that the major banks were making £2 billion per year in profits from small business banking. We call on the banks to live up to their undertakings to the Competition Commission or, if they fail to do so, for the regulators to make them'. The report came as the Office of Fair Trading launched a new study into the charges being imposed by banks on personal banking customers. Workers warned over 'pensions poverty' Many UK workers are running the risk of poverty in retirement, according to a new report. The Fidelity Retirement Index warns that a significant number of workers still have few if any retirement savings, and could find their earnings cut by around a half when they retire. While members of final salary pension schemes are set to build up around 85% of their working life income in retirement, many members of money purchase schemes will experience a reduction in income of more than 50%. Simon Fraser of Fidelity said, 'Unless defined contribution plans are brought up to the same quality level of defined benefit schemes, then we will condemn generations of workers to a meagre retirement'. We can help you to put in place a proper financial planning strategy – please contact us for further information. Home Information Packs 'raise significant opposition' Plans to introduce new Home Information Packs (HIPs) for people looking to sell their houses have raised concerns from estate agents and legal bodies in recent months, and a House of Lords committee has now called on the Government to take criticism of the scheme seriously. The packs, which are due to come into force in England and Wales on 1 June, will be mandatory and must contain title deeds, legal searches and an Energy Performance Certificate which assesses the energy efficiency of a property. The aim of the packs is to make the process easier and faster for people buying and selling a house, and to reduce the number of sales which fall through. However, some industry bodies have argued that the packs will be of little real use to homebuyers, and have also expressed concerns that there are not currently enough people who are sufficiently qualified to assess the energy performance of properties. Lord Filkin, Chair of the Lords Select Committee on the Merits of Statutory Instruments, said, 'The comments which we have received from key stakeholder organisations in the housing market are striking in the strength of their criticisms'. Mike Ockenden of the Association of Home Information Pack Providers has refuted the committee's comments, stating that it had only consulted opponents of the scheme. HIPs are expected to cost between £300 and £500 on average. Business group calls for £17bn tax cut The Confederation of British Industry (CBI) has called on the Government to cut business taxes by £17bn over the next three years, and to boost spending on transport, education and training, and science and innovation by more than £20bn. In its submission to the Treasury on the 2007 Comprehensive Spending Review, the business group calls on Chancellor Gordon Brown to reduce the proposed 2% average increase in public spending growth, to 1.6% a year in real terms. The CBI argues that the changes could be made possible by improving public sector efficiency. Ian McCafferty, Chief Economic Adviser at the CBI, said, 'For the CSR to be credible it must rigorously prioritise its objectives to make the most of its limited resources, while boosting the quantity and quality of services through a radical transformation of the way public services are commissioned and delivered'. The organisation warns that a failure to cut spending plans could result in damaging tax rises for UK businesses. Firms 'unaware' of R&D tax relief Many small businesses are missing out potential Research and Development (R&D) tax relief, as a result of a lack of awareness, according to a new study. The report suggests that only one in five small and medium-sized businesses understand the R&D tax relief system, and that less than half of those firms have applied for the relief. However, half of those businesses which did submit applications had their claims accepted by HM Revenue & Customs. R&D tax relief applies to businesses which undertake a research project with the aim of developing a new scientific innovation. There are some restrictions which apply, and the application process can be time consuming, but we can help you – please contact us for further assistance. The first three months of 2007 saw a record number of insolvencies for England and Wales, as some 30,000 people went bust. The Insolvency Service has reported a 23.9% increase on the same period in 2006. The principal cause of the rise seems to be the tougher approach being taken by lenders towards debtors wishing to enter Individual Voluntary Arrangements (IVAs). An IVA is an alternative arrangement to bankruptcy, allowing the debtor to agree repayments to creditors either in one lump sum or in instalments. This year more than 18% of IVA proposals put forward by individuals in debt where rejected by creditors – nearly double the amount in the same period last year. CBI creates new Tax Task Force The Confederation of British Industry (CBI) has launched a new Tax Task Force, to examine whether the UK's corporate tax regime is still 'fit for purpose'. The Task Force forms part of the CBI's ongoing campaign on business tax. The group will draw up proposals for adapting the tax regime in order to ensure the competitiveness of UK-based companies, and its recommendations will be put to the Treasury and the wider Government. Task Force members will include finance directors and heads of tax from UK firms across all key sectors, and of all sizes. Richard Lambert, CBI Director-General, said, 'Tax may not be the most political or obvious of global challenges facing us, but it is very real'. 'It needs to be high on the agenda of the next Chancellor if he or she wants to foster a successful, growing UK business sector that provides a reliable tax revenue stream over the long term.' Interest rate rise 'threatens economic growth' Recent increases in interest rates are threatening UK economic growth, the British Chambers of Commerce (BCC) has warned. The latest BCC Quarterly Economic Forecast has predicted a marked slowdown in the pace of UK economic activity, with below-trend quarterly GDP growth over the period mid-2008. David Kern, Economic Adviser to the BCC, said, 'In our new central scenario, year-on-year GDP growth is forecast to decelerate from an above-trend 3% in Q4 2006, to 1.9% in H1 2008. But there is a distinct risk that the UK slowdown would be sharper'. At its last meeting, the Bank of England's Monetary Policy Committee raised interest rates by a quarter of a percentage point to 5.5% - the highest rate in six years. The move was widely expected by analysts, following the news that inflation rose to 3.1% in March. However, the BCC has called on the Bank of England to adopt a 'wait-and-see' approach to inflation, and to avoid over-reacting to 'transitory developments'. New legislation to crack down on illegal working New legislation is set to introduce prison sentences and/or unlimited fines for employers who are found to have knowingly employed illegal workers. Under the plans, civil penalties will also be levied on companies which have been negligent in carrying out checks on workers. The proposed measures form part of the Home Office's Illegal Working Action Plan, and are due to take effect early next year. The Action Plan also includes the proposed introduction of compulsory biometric identity cards for foreign nationals, and a new employee checking service which aims to improve the support offered to employers. Responding to the proposals, the Confederation of British Industry (CBI) acknowledged that employers have a duty to check their staff, but warned that ID and other documents must be reliable. John Cridland, CBI Deputy Director-General, said, 'At the moment fake documents can make life very difficult for employers, and the Government also has problems with identification'. 'The burden on business will be reduced if the new checking service is good quality and if the new ID card system for migrants is effective.' Small businesses 'could face surprise tax raids' Small businesses could be faced with unexpected visits from the taxman, following the news that HM Revenue & Customs (HMRC) is seeking the right to enter business premises to examine goods and records, as part of investigations into corporation tax liabilities. Under proposals put forward in a consultation paper, HMRC officials could also gain the right to visit private residences to inspect business assets or stock kept on the premises. The plans have received a mixed response, with supporters emphasising that HMRC has acknowledged the need for safeguards, and that wherever possible queries will be dealt with via correspondence and telephone conversations. However, critics of the proposals have highlighted their concerns that HMRC is seeking to grant direct tax officers the same powers as Customs officials who are pursuing criminal cases. HMRC recently presented its Departmental Report for 2006/07 to Parliament, revealing a rise in tax revenues for the second consecutive year. The report showed that HMRC collected net receipts of £423bn from taxes, duties and other revenue, representing an increase of £25bn on the previous year. Government outlines 'road pricing' plans The Government has unveiled a draft Bill to allow local authorities more control over transport issues, including the introduction of pilot road charging schemes. Under the plans, local councils would have the power to run congestion charging schemes. Business groups have urged the Government to ensure that any new systems are properly coordinated, and that businesses are fully consulted. Karen Dee of the Confederation of British Industry (CBI) said, 'Rising congestion risks slowly strangling the economy, so companies can see the relief that road pricing would bring. But if pricing is to command support it must come as part of a wider strategy that includes more investment in transport infrastructure'. Meanwhile, the Federation of Small Businesses (FSB) has called for local referendums to be held on the issue. Steve Collie of the FSB said that without such a vote, road charging would be 'completely illegitimate'. Business welcomes planning shake-up Business groups have given a broad welcome to the Government's White Paper on Planning, which aims to speed up the planning process and deliver major improvements to infrastructure. The new system will replace more than 8 existing regimes, and is expected to save over £1bn within the next 10 years. The proposals include:
The Confederation of British Industry (CBI) has particularly welcomed the plans to establish national strategies for the transport and energy sectors, together with the introduction of an independent commission. Richard Lambert, CBI Director-General, said, 'The current system is not working and many vital developments have become bogged down in a quagmire of red tape and bureaucracy. The new proposals should streamline the system without losing its democratic responsibilities'. David Frost, Director-General of the British Chambers of Commerce (BCC), commented, 'It is vital for the UK's competitiveness that an independent planning commission can tackle head on the NIMBY arguments that have held up so many crucial developments'.
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