Growth

Growth will return to the UK economy towards the end of 212, and “pick up a little pace” during 2013, according to the Confederation of British Industry’s latest quarterly economic forecast.

The organisation is predicting GDP growth in 2012 to be -0.3%, somewhat shy of its previous forecast in May of +0.6%. This reflects a more negative first half-year and a slower rate of growth in the second half than was expected in May.

It now expects an uplift in GDP growth in late 2012, with a bounce-back from the Jubilee effect and a fall in inflation. In the third quarter of 2012, quarter-on-quarter growth is expected to be +0.6%, followed by +0.2% in the final three months.

Looking forward to 2013, the CBI forecasts GDP growth of +1.2%, revised down from its previous forecast of +2%, reflecting a smaller contribution from net trade, given a weaker rate of global growth than previously forecast. It adds the risks for such a prediction, “are on the downside given on-going global uncertainty”.

John Cridland, CBI Director-General, said:

‘CBI Director-General, said: ‘At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year.’

‘Underlying growth will return to the economy later in the year than previously expected, with a somewhat better outlook next year.’

‘However, euro area uncertainty, and the looming “fiscal cliff” of spending cuts and tax increases in the US will only add to the sense of unease during the coming months.’

It found that heavy discounting by retailers and a sharp fall in world commodity prices has led to a faster-than-expected drop in the rate of inflation. Combined with weak wage growth, inflation is expected to fall further by the end of the year, and should remain close to the Bank of England’s 2% target throughout 2013.

The CBI said it does not expect unemployment to increase by as much as previously thought, peaking at 2.7m in mid-2013.

With high levels of uncertainty persisting in the economy, growth in business investment is expected to remain modest, at around 5% this year and 3.8% in 2013.

Cuts?

Cuts? What cuts?

No wonder the Government is having to borrow more money, instead of slashing the debt mountain built up under Blair and Brown - last month curent spending was up 5% on a year ago! Cash cuts in current spending are not planned this year or the next. By 2016-17, the Government expects current spending to be £709 billion, 13% more than the cash total for 2010-11!!

Polly Peck

 Polly Peck was the darling of the Stock Market because of its impressive profits record. However, most of its trade was overseas and it used to book foreign currency profits to the P&L account and foreign currency losses to reserves. Its legendary profitability was largely a sham

http://www.bbc.co.uk/news/uk-19352531

Economy

The Office for National Statistics (ONS) has just had to admit that its growth figures for quarter 2 were hopeless wrong. The ONS rushed out figures showing that the economy had shrunk by 0.7% in quarter 2, seemingly desperate to show that the eceonomy had gone into double dip territory. It has now been forced to admit that its figures were 29% wrong, and the economy only shrank by 0.5%. You'd get more accurate figures by hanging a piece of seaweed from your garden shed!
Many experts still doubt the accuracy of the new figures as they simply don't stack with a whole raft of economic data. In quarter 2 employment rose by 200,000 - not something firms would do if the economy was collapsing back into recession! Retail sales also grew by over 3% in the same period!
Meanwhile, the mandarins at the ONS are predicting growth of 0.7% in quarter 3 (which at an annualised rate is near boom). They don't seem to be able to explain why the economy should go from bust in quarter 2 to boom in quarter 3 when nothing in the wider economy has changed.
The numbers all point to the fact that it makes more sense that the economy was not in fact in negative territory in quarter 2 and that there was no double dip!

Pensions

According to research by Prudential, one on four higher rate taxpayers cannot afford to contribute to a pension scheme. This is worrying news given that the Government is about to force us all to make pension contributions under their new auto-enrollment scheme.

Pesions shock

A retired couple in their 70’s – one of whom suffers from Parkinson’s disease - will now have to cough up thousands of pounds to HMRC after landing a huge tax interest bill for transferring their retirement funds to Guernsey to avoid UK tax laws.

Neil and Megan Gretton, dubbed ‘honest and compliant taxpayers’ by the First Tier Tax Tribunal which heard the case, were advised to shift two of their Scottish Equitable pensions – worth £231,000 - to Guernsey in 1996 by pension adviser Knightsbridge Associates.

The couple was told that the scheme would enable them to avoid purchasing an annuity and allow them to hand their pension funds on to their children when they died.

But HMRC successfully argued that the transfers were invalid because the couple had not permanently moved to Guernsey, only leased a property there for three months, which they were advised would be sufficient.

While the Grettons said they moved the money in good faith and Knightsbridge Associates was cleared of any wrongdoing, HMRC won its case in 2010, forcing the couple to pay back £86,000 in unpaid tax.

And in the latest twist, a new court case has ruled that the couple must also now pay interest on the £86,000 going back to 1996 as well as the tax charges. This is likely to wipe out most of their pension pots.

The scheme the Grettons transferred their pensions into was the brainchild of convicted fraudster, Malcolm Tune, who was arrested in 2009 and sentenced to five years for running a £2.5 million fraudulent tax scheme. In 2005, Tune left his wife and five children to skip bail and head for South-East Asia.

He was finally tracked down to Ireland before being returned to Britain and jailed.

Tune again gained notoriety in 2007 after being accused of conning disabled people by selling them the £4,000 Powertrike device through Tune’s company PDQ Mobility, which turned wheelchairs into powerful trikes. The Powertrike device was flawed and described by a judge as ‘inherently dangerous’ after several occasions where the trikes became unstoppable.

The judge also described Tune – once a lay reader, church choir member and auditor of the local Scout group and horticultural society in the village of Orwell, Cambs, as ‘a nasty piece of work’ for refusing to provide refunds to unhappy customers.

transfer pricing

The International Manual features a major rewrite and update of HMRC guidance about transfer pricing for direct taxes. HMRC has reworked the structure to present information in a more logical way, with more hyperlinks to other subjects in the manual.

The manual contains up to date guidance for HMRC staff on key international tax issues including practical guidance on working transfer pricing and thin capitalisation cases.

It is available from HMRC.

Bank worker fraud

http://www.bbc.co.uk/news/uk-england-london-19164730

Doesn't fill you with confidence!

Labour tax dodge

After being told that it was "morally wrong" to pay a builder in cash it now turns out that the Labour Party used a tax dodge when Tony Blair was in office to sell its former headquarters in Central London and saved itself "tens of thousands of pounds".

Company cars

A recent case (TC02120: David John Cooper and related appeals) illustrates the dangers of tax planning and taking things a bit too far.
Mr D J Cooper and Mr P D Cooper were directors of a company. Mrs Cooper and Mr N Cooper were not directors or employees of the company. Mrs Cooper is the wife of Mr D J Cooper and Mr N Cooper is the son of Mr D J Cooper.
The four were in partnership, which provided administrative services to the company. The partnership provided cars and car fuel benefits to each of the individuals and the cars were available for their private use. The fees charged by the partnership to the company covered the costs of the partnership, including the cost providing the cars and the fuel.
HMRC argued that the car and fuel provided by the partnership were made available to Mr D J Cooper and Mr P D Cooper by reason of their position as directors of the company and to Mrs Cooper and Mr N Cooper by reason of Mr D J Cooper's position as a director of the company. HMRC assessed Class 1A NIC of around £70,000f or 2002/03 to 2008/09. For 2002/03 to 2005/06, HMRC argued discovery assessments for income tax of around £145,000 on the benefit were due on Mr D J Cooper.
HMRC argued that all of the costs of providing and fuelling the cars were met by the company through the management charges it paid to the partnership. The cars were only to persons who are directors of the company or family members of a director. If the company was not doing business with the partnership, the partnership would not be in a position to provide the cars and meet the fuel and other running costs.
In addition, to the extent the cars were used for business, they were used (in the case of Mr D J Cooper and Mr P D Cooper) on the business of the company. The partnership was little more than an extension of the company set up to avoid/reduce income tax on the cars.
The Tribunal stated:
‘It is clear beyond doubt, on the authority of Wicks v Firth, that a benefit in kind, such as the provision of the use of a car, can be provided (or, in the case of a car, having regard to the terms of section 114 ITEPA 2003, made available) by reason of the employment of a person in circumstances where it is provided (or made available) by an entity which is not the
employer of the person enjoying the benefit. Whether this is so "must depend on a variety of circumstances including the source of the benefit and the relationship, rights and expectations of the employer, the employee and the third party respectively…"’
The partnership was wholly dependent on the company - it had no business other than providing services to the company and the fees were excessive. Although it may have been the case that the partnership acquired the cars from capital contributed by the partners, the cost of the cars was ultimately borne by the company. The cars and fuel were made available by reason of employment.
The taxpayers also argued that the charges should be reduced, as the individuals had made contributions or paid sums for private use by retaining in the partnership, and not withdrawing, their profit shares.
However, the Tribunal held that there was no basis for reducing the charges – no sums had been contributed towards the cost of the vehicles or private use made good.
The appeal was dismissed.

Universal credit

Universal credit plans proposed by the government will be ‘particularly onerous and burdensome’ for small businesses and the self-employed, CIOT has warned. According to the tax group there are at least three significant ramifications for the UK’s entrepreneurs, should the government’s current plans to replace the tax credits system with a single credit be pushed through without amendments.

The areas of concern highlighted by CIOT include a requirement for eligible self-employed individuals to report their monthly earnings in a different way to the one they use to calculate tax and to do so within a week of their month end.

The tax specialists are also alarmed that while under the current tax credits system cash payments are recognised on a month by month basis, the universal credit does not. This means that someone could earn £1m in the first month and nothing for the rest of the year but still be entitled to the credit for the following 11 months.

Andrew Gotch, chairman of the CIOT’s Owner Managed Business sub-committee, welcomed the government’s intention of simplifying the tax credit system but said:

‘The universal credit proposals seem to fly in the face of simplicity when it comes to the reporting requirements being imposed on small employers and the self-employed. Requiring businesses to report payments to employees “on or before” the time they are made will present huge problems in some sectors. Requiring small businesses to report their earnings online within seven days of the end of a monthly assessment period is totally impractical. Most businesses will struggle mightily to collect the necessary information in this time and many will fail to do so, thus being involuntarily excluded from benefits.’

‘In summary, we think the regulations require much further thought. We would be pleased to work with the DWP [Department for Work and Pensions] and the Social Security Advisory Committee to try to develop something that is workable for all parties.’

DWP estimates suggest that around 60,000 homes with self-employed earners could be affected by the proposed universal credit, though CIOT consider the figure could be significantly higher.

French tax

France has become the first European country to impose a transaction tax on share purchases. The 0.2% tax will apply to the purchase of 109 French stocks with market values of more than €1bn (£788m). It will be levied on any transactions resulting in ‘a transfer of property’ of companies trading in Paris, regardless of where the buyer or seller is based.

Details of the tax were included in President Francois Hollande’s revised 2012 budget which was passed by both houses of the French Parliament this week. The new tax is double the original 0.1% levy proposed by Hollande’s predecessor, Nicolas Sarkozy.

The French government estimates that the doubling of the tax will bring in an additional €170m (£134m) in 2012 and €500m (£394m) next year, while volumes of stock purchases are likely to fall to €800bn.

The government will start collecting the tax in November, but there will be a delay in applying the new tax to American Depository Receipts (ADRs) which are issued by US banks. ADRs will only be taxed from January 1 2013, the Budget Ministry said.

The French government said the aim of the transaction tax was to curb market speculation and said it may be expanded next year along with some European partners.

Bent Broadcasting Company

Claims that the BBC has sought to reduce its tax contributions by requiring some employees to set up personal service companies (PCSs) are "misleading", the broadcaster’s CFO has said.
In an email to staff at the taxpayer-funded broadcaster, Zarin Patel refuted suggestions that thousands of workers had been told "to go 'off the books’ in order to cut our tax bill".
She also denied that the BBC was "avoiding national insurance contributions". She said that the BBC would review its tax arrangements in an effort to “reassure licence fee payers that all of our arrangements are functioning correctly and appropriately".
A report in the Times has claimed that newsreaders Fiona Bruce and Emily Matlis are also thought to be employed through PSCs.
The newspaper reported that "several presenters are furious that they have been subjected to questions about their integrity as a result of a BBC decision that they claim they strongly resisted".
Patel's email followed her appearance earlier this month before the Commons Public Accounts Committee (PAC).
The chair of the public spending watchdog, Margaret Hodge, said she had heard from one long-term presenter who had been employed by the BBC for more than 20 years, who said he had to go "off books into a service company" or he would not be employed.
Patel said that that situation would be “totally unacceptable” and would look into the claim.
The committee focused on the distinction between full-time employees and freelancers who work regularly for the BBC and who, it is claimed, can use PSCs to lower their tax bills by not paying NICs.
Patel told MPs that of 467 presenters, 148 are on long-term contracts through service companies. She said that the BBC did not try to avoid tax.
She also said that IR35 legislation, which stops employers masquerading as contractors, including by using PSCs, would prevent people from using PSCs to avoid paying tax and national insurance contributions.
“In my judgment, the IR35 anti-avoidance legislation is very strongly crafted, so that if you work through a service company, on an employment-type contract or quasi-employed, you will pay the same amount of tax.”
HMRC is consulting on proposals to tighten IR35 compliance by requiring organisations engaging “controlling persons” through PSCs to deduct income tax and NI from fees paid to their companies.

Disqualification

The Insolvency Service has disqualified two directors of a company for a total of 17 years after they submitted falsely inflated invoices to a factoring company.

William and Fiona Lloyd will not be able to manage or in any way control a company, or be a director for 12 years and five years respectively.

The company, White Dot Box Holdings, had a contract with the internet search provider to prom...

ote their service among their clients. In July 2009 the provider withdrew most of their business, resulting in a reduction in turnover, at which point the company started to experience financial difficulties.

The company also had an agreement with a factoring company who would advance 75% of the monies to the company based on the invoices which were issued to the provider. The factoring company would then collect payments directly from the search provider.

White Dot Box Holdings was placed into liquidation on 11 August 2010 with an estimated deficiency of £665,855.

The investigation showed that between January and May 2010, Mr Lloyd deliberately produced and submitted by email, 17 falsely inflated invoices to the factoring company, all of which were signed by Mrs Lloyd as an authorised signatory.

To facilitate the submission of the falsely inflated invoices Lloyd created fake Slovenian email accounts in the name of the search provider so the factoring company would advance monies based on these invoices. White Dot Box Holdings received £366,900 from the factoring company to which it was not entitled.

Claire Entwistle director of company investigations north said: “Using false documents is contrary to the conduct expected of a company director and The Insolvency Service has strong enforcement powers which we will not hesitate to use to remove dishonest or reckless directors from the business environment.”

Although Mr Lloyd was not formerly appointed as a company director, he was sufficiently involved in the management and decision-making to be considered to have acted as a director.

An Insolvency Service spokesperson told AccountingWEB: “While the process of raising money using false invoices is not an uncommon offence in the fraud cases that we see, much more common than this offence is taxation fraud and failure to file proper accounts or paperwork.”

Tax evasion

Since the start of the financial crisis, HMRC has paid out over £1m to whistleblowers who provide information about tax evaders.

Typical HMRC informers include former business partners of evaders, former spouses and employees, as well as people reporting ‘someone bragging in the pub’ and ‘warring neighbours’, the spokesman said. An informer’s identity is generally kept confidential, although it may have to be disclosed in certain legal proceedings.

An HMRC spokesman said that payments to members of the public who provided information about tax evasion were made at HMRC’s discretion and depend on ‘the value of the information and the quality of the result’, according to the Daily Telegraph.

Figures released by HMRC, under the Freedom of Information Act, to the investigative website Exaro show payments have gone up by a fifth in the last year, rising to £374,000 in 2011/12 and were double the amount paid out five years ago. In comparison HMRC paid out £309,620 in 2010/11, £384,110 in 2009/10, £281,000 in 2008/09, and £155,950 in 2007/08

New P46

HMRC has created a single page version of form P46 called P46 (Short) which enables employers to collect necessary information from new employees who do not have a P45.

Almost all employers must send a number of their in-year PAYE forms online to HM HMRC/ These are the employee starting and leaving forms, P45 and P46, P46(Pen) and P46(Expat).

The new form and further details are available from HMRC.